Beware of car loan traps
You've been dreaming about your new car. You've been searching online and have finally found the perfect one. It’s going to be yours. But you don’t have the cash, so you need to get a car loan.
Just because your new car is almost in reach, make sure you give some thought to the details when deciding on how to finance your car. A car dealer can smell an excited buyer a mile away. Be an educated buyer and save yourself hundreds of dollars by being aware of the traps to look out for.
The extremely low interest rates offered by car dealers might seem great, but they’re usually only for a short period of time, meaning the repayments have to be much higher to pay the loan off in time. Consider whether these repayments fit into your budget.
If your monthly repayments are small, you may only be repaying part of the amount you've borrowed and have to pay a large amount (the balloon payment) at the end of the loan. Not fun.
Be on the lookout for monthly or annual fees, which add to your repayments.
Early payout fees
If you want to pay off your loan early, some finance deals can hit you with a hefty early payout fees. So make sure you have full visibility of what these are likely to be, before committing.
Loan protection insurance
This insurance covers your loan repayments if you can’t work because you’re sick or injured. To save doubling up, check if your employer or current insurance already covers you.
Added extras are where dealers make extra cash. These include things like rust treatments, tinted windows and extended warranties, which you pay a premium price for. If you really want these extras, check what they cost outside of the car yard before adding them to your car loan.
This information is general in nature. It does not take into account your personal needs and financial situation and you should consider what is appropriate for you. Please consider our Products and Services Conditions of Use and Financial Services Guide in deciding whether to acquire any Defence Bank product or service. These documents together with current interest rates and terms are available at defencebank.com.au