If you own a car, you’ve probably considered what you might do if it broke down or needed unexpected repairs. Even if it hasn’t happened to you personally, it’s a common occurrence for drivers all over New Zealand. But for households that rely on their vehicle to get to work, school or just around in their daily life, it can be a major headache.
Repairs often need to be done quickly and can be expensive. Here’s what you need to know about handling the cost of emergency car repairs, and how to find an appropriate finance solution for your needs.
Why are emergency car repairs financially stressful?
There are lots of reasons why emergency car repairs can be very stressful.
- They’re unexpected: You can’t budget for them because you don’t know when they’re going to happen. You often don’t have time to save up for them, and you might have competing financial obligations that need your attention.
- They can be expensive: It’s often not cheap to get your car back on the road. The AA says it’s common for a transmission to cost almost $10,000 to repair.
- Immediate need to get back on the road: Most of us can’t be without our vehicles for long, so there’s usually pressure to get moving and find a solution as soon as possible.
- Many people don’t have emergency savings: While it’s often advised that households have an emergency savings fund to cover these sorts of scenarios, that’s easier said than done. You might not yet have had a chance to build one up – or maybe you’ve already had to use it for something else and need to build it up again.
Common types of emergency car repairs in NZ
The AA says there are a number of common car repair costs that people encounter. They include engine computers needing fixing, power steering going wrong, and transmissions failing. Electrical or battery issues, including for hybrid or electric vehicles, can also be an issue. Sometimes, things are discovered during a warrant of fitness check.
How much do emergency car repairs cost in New Zealand?
Emergency car repairs can vary a lot in cost, depending on what has gone wrong. You might pay a few hundred for more minor repairs, up to many thousands of dollars for major repairs, or when more than one thing has gone wrong.
There can be a lot of factors that influence the cost, including the type and age of your vehicle, how easy the required parts are to access, and the amount of labour required. It can sometimes be worth shopping around and getting a few quotes to make sure you’re getting good value.
How to assess whether you need financing?
If you’re wondering whether you need to get a loan to help with the cost, there are a few things to consider. Can you cover the cost otherwise? If you have savings, this might be a time when it’s appropriate to tap into that amount to cover the bill.
Will the repair improve the vehicle’s lifespan and reliability? If your car is relatively new and otherwise reliable, it may be a no-brainer to get the repairs done, even if you need to borrow some money to do it. But if your car is quite old and there are concerns that more things may go wrong in future, you might question whether it’s worth doing.
Is the cost reasonable compared to the vehicle’s value? You may need to take into account what it would cost to replace the car you have, rather than repair it. You could see what similar cars are selling for and compare that to the quotes you’ve had for the work that is needed.
Is the repair urgent or can it be delayed? If the repair has to happen very soon, you may need to finance it to ensure that you’re back on the road as soon as possible. If there’s a bit more leeway, you may have time to save up instead.
Ways to pay for emergency car repairs in NZ
Using savings or an emergency fund
This is usually the most cost-effective option because you won’t pay any interest. But it requires you to have some savings built up, which some people are finding tricky, given the cost-of-living pressures many households have been under.
Mechanics’ payment plans
Some offer installment options to pay off the cost of work done. This can be a good solution if it’s available, but it’s important to understand the terms you’re agreeing to.
Credit card or buy now pay later
These are quick and easy to access, but can be expensive if not handled well. Buy now, pay later generally requires you to clear the debt within a relatively short period of time, or face significant late fees. Credit cards can mean the debt can hang for a long time, costing you a lot of interest.
Car repair loans
Car repair loans have a clear structure. When you make the payments on time over the term of the loan, you clear the debt. They may have lower interest rates.
Borrowing from family or friends
This can be a flexible way to access money, but it requires clear agreements to ensure that everyone’s expectations are aligned. Some people prefer not to mingle money and relationships.
What is a car repair loan?
A car repair loan is a type of personal loan that is used specifically for vehicle repairs.
It can be secured or unsecured. When a loan is secured, the lender registers an interest in an asset – maybe the borrower’s vehicle – as security, and can sell it if they do not make their repayments. A car repair loan usually has fixed repayments over a set term.
How to get a car repair loan in New Zealand?
Step 1: Confirm the repair costs
First, you’ll need to know exactly what you will have to pay to have your vehicle repaired. The best way to do this is to get a confirmed quote from your mechanic at the outset.
Step 2: Assess your financial position
Look at your income, your expenses and any existing debt. This will give you an indication of how much you might be able to afford to borrow.
Step 3: Check your credit score
You can check your credit score with any of New Zealand’s credit bureaux. This will give you an indication of how your application might be handled by lenders. Generally, the higher your credit score, the easier lending may be. If there’s anything incorrect on your credit report, you can ask for it to be fixed.
Step 4: Compare lenders
We’ll help you look at the options available to find a lender who will be an appropriate fit. You might look at things like interest rates, but also the flexibility different lenders offer and any fees involved.
Step 5: Prepare your application
To get going, you’ll need to provide proof of your identification, as well as evidence of your income. That could mean supplying payslips or copies of your bank statements.
Step 6: Apply and get approval
Our online application process helps you complete the process in your own time and at your own pace. Depending on when you apply, you may receive an answer the same day.
Step 7: Review loan terms carefully
Before you agree to the loan, take the time to be sure you understand the terms. What interest rate will you be paying? What fees will be charged? Are you happy with the repayment schedule? We can help you with any questions you may have.
When does financing a car repair make sense?
It often makes sense to take a loan to repair a vehicle. You might need the repair so that your car is safe to use. Many of us use our cars multiple times a day, and it’s generally not feasible to be without one for a period of time. If your vehicle is still worth a good amount of money, it may well be worth spending the money to repair it and get it back to its full function again.
If you can comfortably afford the repayments, the loan may fit into your financial life without too much trouble. Sometimes, a loan can be a cheaper option than other types of debt that people might use to pay for car repairs.
When may financing not be the best option?
It might be worth thinking twice about taking a loan to repair a vehicle if the cost of the work required is more than the vehicle itself is worth, or the vehicle is nearing the end of its life. It is also worth pausing if you are struggling with existing debt, or you’re worried that the loan repayments would be difficult.
Lenders have an obligation to ensure that borrowers can afford the loans they take out, but you also need to be comfortable with what you are agreeing to.
Understanding the true cost of financing repairs
There is more to the cost of your loan than the interest rate you are charged.
Your loan term
A longer loan term can be more expensive. It means lower repayments each week or month, but it means that you take longer to pay off the debt, so your overall interest bill will be higher. For example, a $3000 repair financed over 24 months with a rate of 14.9 percent would cost $43 a week, or a total of $4440. A loan term of 36 months would lower the weekly repayment to $30 but increase the total cost of borrowing to $4752.
Fees
You’ll be charged establishment fees, and you may also need to pay a monthly account fee, depending on the length of your loan. If you pay the loan off early, you might be charged a fee for this, too. It is worth comparing the total cost of your loan with the upfront repair cost to understand the cost of borrowing.
How do emergency car repair loans affect your finances?
Generally, when you apply for a loan of any sort, it may lower your credit score in the short term.
But when you make your payments on time and pay the loan off, your score will generally improve.
The key is to make your repayments on time. If you’re planning other borrowing in the near term, you might need to consider whether your car repair loan will affect that.
Tips for financing car repairs responsibly
- Borrow only what you need: Limiting your loan to the essentials will reduce what you have to borrow, which means you may be able to pay it off more quickly and reduce the overall cost of borrowing.
- Choose the shortest affordable loan term: Usually, the shorter your loan term, the lower your total interest cost. Paying your loan in the shortest term you can afford should save you money because your loan balance will reduce more quickly, which brings down the amount of interest you pay overall.
- Avoid stacking multiple debts: It can be hard to keep on top of your debt if you have a lot of loans. If you’re worried about your lending, chat to our team. We can help you work out whether consolidation may be an option.
- Compare multiple lenders before committing: We can help you look at a range of lenders to find an appropriate fit.
How to reduce the risk of future emergency repairs?
While some repairs are unavoidable, it may be possible to reduce the chances of future problems.
- Regular servicing and maintenance: Regular servicing can stop problems before they start. The AA recommends servicing every year or 10,000km, whichever comes first.
- Address minor issues early: A bit of preventative work can stop a more expensive problem down the track. Don’t skimp on minor repairs.
- Set up a dedicated car emergency fund: Put some money aside each week or month to build up an emergency fund you can call on if something unexpected happens.
- Consider extended warranties (if applicable): As well as the rights you may have under the Consumer Guarantees Act, it is sometimes possible to pay for additional warranties and mechanical breakdown insurance, which can help with the cost of repairs.
FAQs
Can I get a car repair loan with bad credit in NZ?
You may be able to. We can help you look at your options.
How quickly can I access funds for urgent repairs?
Possibly more quickly than you think. We may be able to get you an answer within a day or two of submitting your application and all required supporting information.
Are car repair loans secured or unsecured?
They can be either. A secured loan generally has a lower interest rate, but means you’re offering an asset as security, which could be sold by the lender if you don’t repay your loan.
Can I repay early without penalties?
It depends on your lenders’ terms and conditions. We can help you to understand what fees might apply.
Is it better to repair or replace my car?
It depends a lot on your individual situation and the condition and age of your vehicle.
Need to get on the road?
If you need finance to get your car back on the road, get in touch with us. Our expert team can help you to consider your options and find a loan that’s suitable for your circumstances.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.
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