Are you in the market for a new car? If so, you might have started thinking about how you’re going to pay for that purchase.
If there’s a car or other vehicle, you’ve got your eye on, but your bank account can’t quite stretch to cover it - or maybe you’d just rather spread the cost - finance could be the ideal solution to get you behind the wheel.
Every year, many thousands of New Zealanders opt for car finance to purchase their next vehicle. But it’s important that before you go ahead with any lending decision, you’re fully informed about the process.
Here are a few things to think about to help get you on the road sooner.
Wondering how it all works? Here’s what you need to know.
Car finance usually means a loan that is taken out and secured against the car. If the car costs $10,000, you borrow that money from a lender and then pay it back – plus interest.
You’ll have a set number of years to pay off the loan – often, the term is somewhere between one to five years, depending on your circumstances.
The amount of interest you’re charged will be set at a rate that is set for the term of the loan.
Applying for a car loan is usually relatively straightforward.
As you get ready to apply, you will probably start by assembling some paperwork to prove a few things to the lender.
You’ll need to show your ID, to prove who you are, give the lender proof of your address, and details about your income. The lender will also do a credit check on you to make sure that you are able to repay your loan.
The most common reason for taking out a loan to buy a car is probably that many of us don’t have the cash in our bank accounts to pay for a vehicle outright when we spot one we want.
But there are other reasons why it could be a smart choice, too. Finance allows you to spread the cost over time, which can improve your cash flow. This can be helpful for people who are in business, too and want to spread the cost of acquiring an asset.
It also means that you may be in a position to upgrade your vehicle in the future if you want to.
But hold on - if you’ve already tried to apply for car finance and been unsuccessful, you might be wondering: Why did my car finance application get rejected?
There are a number of reasons why someone might be refused car finance. In some cases, it might not even be anything you’ve done.
Sometimes lenders turn people down because of poor credit history, not having enough income, or having too much debt compared to their income.
You might also have provided inaccurate or incomplete information as part of your car loan application, which could mean your application is rejected. Sometimes, a bit of missing info can make all the difference.
In some cases, the car itself might not meet the lender’s criteria. If a car is too old or has too high mileage, the lender might think it’s not appropriate security.
If you have moved to New Zealand recently, you could find that residency or visa issues got in the way.
If you’ve been rejected for car finance, don’t panic. Here’s a quick rundown of what you can do.
Are there mistakes on your credit record that might be giving a lender the wrong impression? You can request a copy of your credit report from the credit bureaus. If there is anything on the report that is incorrect, you can ask to have this fixed.
You can improve your credit score by clearing any overdue bills or defaults and making all your bills and debt repayments on time.
New Zealand’s system of comprehensive credit reporting means that payments you make, as well as those you miss, add to your credit report.
You can improve your chances of being approved by working on your overall money life. That might mean paying down your debts, saving more money or building up your income.
Do you know anyone who might be willing to take on the loan with you? When you have a co-signer or guarantor, this helps spread the risk of the car loan and can make you more appealing to a lender. A word of caution, though – there are risks for the co-signer or guarantor, and they will need to undergo servicing assessment, etc. It’s not a small thing, so they need to clearly understand what they are committing to.
You don’t have to apply to the first car finance lender that you find. At better finance™️, we can help assess the various options that might be available to you and find a loan on terms that are an appropriate fit. We’re here to help – just get in touch.
There are a few ways to put your best foot forward, and help give your car finance application the best chance of success.
As with all lending, lenders offering car loans want to know they are giving money to reliable people who will pay it back. Part of the way to prove this is to maintain your credit score. You can do this by keeping up with all your payments as they fall due, including things like phone, internet and power. Address any overdue debts quickly. Don’t let things get out of hand or forget any payments.
Car finance lenders like to see a history of strong income. If you know you’re going to be applying for a loan soon, now might not be the time to switch to a new job. If you can find ways to supplement your income, if necessary, that might also help.
Everything will run more smoothly if you provide all the necessary documentation at the outset. Pull together what you need for your application at the beginning of the process to save time and money as you go through the process.
The bigger your deposit, the less money you’ll need to borrow and from the lender’s perspective, it presents a stronger financial position. If you’re worried about getting approved, a bigger deposit may help.
How can I apply for car finance?
Lots of ways – through a vehicle dealership and online being two common ways. If you are ready to get started today, you can apply with better finance in just a few minutes right here.
What do I need to apply for car finance?
You’ll need things like proof of income, proof of address, and ID, but the team at better finance™️ will help with what information you need.
Can I finance a used car?
Yes! You can apply for finance for a car bought from a dealer or from another individual.
How is car finance different from a personal loan?
Car finance is secured against the vehicle you are purchasing.
Can I get car finance with bad credit?
You may be able to get a loan for a car with bad credit. Lenders have different appetites for risk, and it may just be a matter of looking at your options and finding one that is a suitable fit for you. The team at better finance™️ is here to help.
Can car finance applications be refused, and why?
Car loan applications can be refused in much the same way that any other loan application is, when the lender is not satisfied with it. You might find that the lender is not convinced you have enough income to service the loan, or there might be concerns about your credit score or your residency status.
Car finance can be an excellent way to get you into your new car. But it is important to put some time into finding the right loan for you.
Everyone’s circumstances and situations are different, and the right solution for you will need to be a good fit for your individual circumstances.
Get started with better finance™️. Apply online today.
Disclaimer: This article is for general information purposes only. While we aim for accuracy, the information provided is subject to change and may not suit your specific circumstances. Always do your own research and consider seeking independent advice before making any financial decisions.