Thinking of Buying a Car? Here are 3 Important Things You Need to Consider

Let’s face it. Buying a car is exciting!

Unfortunately though, that excitement can overtake other emotions such as being rational or covering all your options before jumping in! That’s why we would like to help by giving you three important pieces of information that you can use, before you sign the dotted line!

1. How much can you afford and how will you pay for it?

O.K. Your very first step in deciding whether to buy a car is if you can afford it. Straight away, if you need to get a loan, you need to do a budget and work out how much you are comfortable with paying. Otherwise, if you have been lucky enough to save the money, how much of your savings you really want to dedicate to the purchase price of the car. If you have the savings, don’t forget there are going to be other costs, so it would be worthwhile keeping some aside for your next registration, insurance, servicing and general running costs. If you need to borrow, using your budget work out how much a week you would be able to pay, remembering that you must be able to pay it EVERY week. There are no “holidays” when it comes to repayments and if you start missing payments then your credit report is going to be affected and this will greatly affect your future borrowing ability.

2. Where will you get your car loan from?

Car dealers and other finance providers are very clever in trying to attract car buyers with headline low interest rates. One way they do this, is by charging a higher amount for the car, as opposed to another seller. For example, you could be offered 2% finance for a car costing $25,000. What you may not be aware of is that exact same car can be bought down the road for $20,000 but the dealer doesn’t have a 2% finance, they have a 5% finance deal. Which deal is better? If you want answers, one solution is to go and see a mortgage broker or a personal loan specialist like Fair Go Finance. They will do the calculations for you and may even be able to source a better personal car loan for you. Car yard finance people are sales driven, they have been trained to close the deal. Before visiting a car yard be prepared for their sales talk and don’t allow them talk you into anything you don’t fully understand or have had time to think about. Make sure you are 100% comfortable with their proposed deal (or anyone else’s) before you sign anything.

3. What to ask about your car loan:

If you do need car finance here are some really important questions you should ask anyone who is offering you a loan.

  • What is the interest rate on the loan?
  • What are the repayments on the loan?
  • What is the term of the loan?
  • Can I pay the loan out early without being charged a penalty fee?
  • Can I pay extra, and if I do, will I be charged any penalty fees for repaying the loan early?
  • Can I change the repayment amount or term if I have an unforseen financial change?
  • What are all the fees and charges?
  • Regardless of how I repay the loan, do I still pay the full amount of interest calculated on the full loan term, or if I pay extra, do I reduce the amount of interest I pay?

By getting the answers to all of these questions, (and if possible get them in writing) you will then be able to make a very informed decision on what loan is best suited to you. There are situations that a 19% interest rate loan could be a better choice than a 2% interest rate loan, because the higher rated loan may allow you to pay it off without any penalties or interest. We hope this information helps you to know what to consider when you want to buy a car. It’s always worth talking to people you know who work in finance too. Please know that we have personal loan specialists here at Fair Go Finance who are also available if you would like to speak to someone about car finance. You can either phone on 1300 324 746 or e-mail They can help explain any terms or figures you may not feel sure about, as well as being able to refer you to someone who can help with your finance needs. Good luck!

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It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:
For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan.
If you are on government benefits, ask if you can receive an advance from Centrelink.

The Australian Government’s MoneySmart Website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.