Your Ride, Your Way: Picking the Right Car Loan Structure for Your Needs

You’re about to slide behind the wheel of your new car. It’s probably as clean as it ever will be, the paintwork is glinting in the sun – but is your vehicle loan a good fit, too? 

If you’re using a loan to help pay for your new ride, there are a few things you might want to think about as you work out the best way to structure it. 

Duration 

This is a key one, because the length of the loan term will partly dictate how much the repayments are. A loan over a shorter term comes with bigger repayments every fortnight or month, but the overall interest bill is lower. 

By stretching out the term, you can lower the repayments, but you’ll also pay more total interest over the life of the loan. 

For example, if you have a $25,000 loan at an interest rate of 10.95% p.a. over a one-year term, with Establishment and Introducer fees totaling $495, your fortnightly repayments would be $1,100, including interest of approximately $1,538.00.* 

If you pay it off over five years, you’ll only pay about $270 a fortnight but the interest bill will be about $6,970.00. (Note: This is an example only; the actual interest rate charged to you will depend on your circumstances, the type of lending required, the security provided, and is determined by the lender).* 

Usually, vehicle loans are paid back over terms between one year and five years. We can help you work out how different scenarios might look and how that fits in with your finances. 

Repayment frequency 

Hopefully, before you found the car you wanted, you worked out roughly what you could afford to pay. When running your numbers, it’s important to have an accurate understanding of your expenses and spending, as well as unexpected costs that can come out of the blue and put the budget under pressure. 

You can also think about whether you want to make payments weekly, fortnightly, or monthly – it will probably come down to what works best with how you manage your budget. 

Check you know exactly what repayments you’re agreeing to and that you can cope with them. Your lender also has an obligation to make sure that your loan won’t put you into financial hardship. 

Flexibility 

Check what flexibility your lender offers you – are you able to increase your repayments as the loan goes on? Is there a fee if you want to make an extra lump sum payment, to pay off your loan a bit quicker? 

Time to talk? 

If you’re setting your sights on a new vehicle, get in touch with us. We’re here to help and can offer personalised service, wherever you are in the country.  

*The actual interest rate charged to you will depend on your circumstances, the type of lending required, the security provided, and is determined by the lender. Fees apply, including an establishment fee of up to $450 and an introducer fee of up to $995. Additionally, lenders may charge a PPSR fee of between $0 and $14, and a Monthly Service Fee of between $0 and $9.85. Fees are detailed in the loan contract and should be reviewed before accepting the loan offer. 

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.