Usually the first question I get asked as a broker by clients is “What is your interest rate?” Although the interest rate is somewhat important in determining your overall deal, there are a lot of other factors that need to be taken into consideration when comparing car loans.
The best way to compare car loans side by side, to compare apples with apples is the repayment and the total payable over the term of the finance, as this will give you a better indication of your overall deal.
The reason being is that there would most likely be fees involved with your loan and may include fees such as monthly account keeping fees, lender establishment fees and Broker or Dealer Origination fees, which can be included within your repayment.
An interest rate at 6% p.a. with high fees can end up costing you more than an interest rate at 10% p.a. with little to no fees in some cases, so it is best to compare your repayments over the same amount and over the same term to get a better view of your overall offerings.
The next loan feature when comparing car loans would be what the early payout penalty is and how this is calculated, as if you were to enter into an arrangement with low set up costs, there may be hefty penalties to break this early to recover those low set up costs, but this may not be important if you plan on keeping the loan for the full term of the finance.
You also need to consider the proposed car that you request to finance and your own personal circumstances fits the lenders criteria and this is where a good Finance Broker can add value, as they should know and understand the lenders criteria including affordability calculations in depth and ensure that you fit their criteria.
There is no use just selecting the lender with the cheapest deal if you don’t qualify for it, and this could also affect you getting the right deal if you were to apply for this loan by placing an enquiry on your credit file and with some lenders could score you worse and result in a higher interest rate.
You would want to make sure that your car loan gives you flexibility in regards to the possibility of financing any vehicle protection, or loan protection insurances, so that you can select the level of cover required by you, not what the lender is willing to finance, as each and every lender would have different limits on what insurance products they will allow you to add to your finance package and in some cases, which insurers they will allow.
The cheapest deal may not in all cases be the best deal for your own individual objectives and requirements. For example, where one person may wish to payout the loan early, the early payout penalty may be more important than interest rate.
A good Finance Broker should have a panel of lenders that can help you compare car loans and ensure that they are able to offer the overall right deal for you, taking into consideration all factors.
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