What you need to know about car finance.

Buying a new car calls for a fair bit of research. You need to be sure you’re choosing the vehicle that’s right for your needs – and your budget. But there’s another aspect of car buying that shouldn’t be overlooked, and that’s your choice of finance.

A car loan is a no-fuss simple type of finance where you make set repayments over the term of your choice, usually one to seven years.

Once you’ve made the final repayment, you own the car outright with nothing more to pay. That can be a distinct advantage over dealer finance, which can mean making a substantial balloon payment even after you’ve owned the vehicle for several years.

What to look for in a car loan.

Be sure to look under the hood of a car loan to know what you’re really signing up for. Here are four factors to tick off.

1. The rate you’ll pay.

The interest rate that applies to a car loan should be clear upfront. But don’t just look at the headline rate. The comparison rate takes into account upfront loan fees and most ongoing charges, so it gives you the true cost of the loan.

The comparison rate is also a useful tool when you’re shopping around between lenders. It lets you make an apples for apples comparison of car loans offered by different banks.

2. New or used rate.

Some lenders charge a higher rate for secondhand vehicles. A Defence Bank car loan comes with the same low rate no matter if your set of wheels is brand spanking new or has seen plenty of road time. Our car loan can also be used to finance a motorbike.

3. Fee-free extra repayments.

The sooner you pay off your car loan, the less you’ll pay in total interest. That makes it worth looking for a car loan that allows additional repayments at no extra charge.

Not all banks offer this sort of flexibility. At Defence Bank we want you to get ahead financially, so you’re free to pay more off your loan without incurring unwanted fees.

4. Pay off your loan early without penalty.

Paying out your car loan early is a big money saver. Along with savings on loan interest, you also benefit by clearing the debt sooner. That way the money that goes towards loan repayments is freed up to be spend on whatever you choose.

Using lump sums like, say, a tax refund to pay off your car loan can see you clear the slate well ahead of schedule. The catch is that some lenders impose a penalty payment for paying out a car loan before the agreed term is over. The closer you are to the start of the loan, the higher the penalty fee can be. This can lock you into paying interest costs that could otherwise be avoided.

You won’t face this problem with a Defence Bank car loan. You’re free to clear the debt at any stage without worries about early payout fees.

Have finance sorted early.

Organising your car loan before you start test driving vehicles is a smart step. Your lender can explain how much you can borrow, which gives you a clear buying budget, and you can negotiate on price with confidence.

It also helps you avoid what can often be the high pressure sales tactics at car yards. You could find you’re encouraged to take out dealer finance. But remember, car yards are in the business of selling cars first and foremost, and the finance they offer may not be suited to your needs or budget.

If you’re looking to buy a car, talk to the team at Defence Bank for more details on things to consider with car finance. Call our Contact Centre on 1800 033 139 or visit your local branch for assistance.

Have any questions? We have the answers. See our FAQs.


Important note: This information is of a general nature and is not intended to be relied on by you as advice in any particular matter. You should contact us at Defence Bank to discuss how this information may apply to your circumstances.

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