Car Loans Comparison

How Do Car Loans Work?

Car loans allow the borrower to purchase a car without having to pay for the whole thing upfront. Instead, the cost is spread over a period of time, making it easier to fit into a budget. Not everyone has enough money saved up to buy a car outright, especially when cars, whether new or used, can be pretty expensive. With vehicle finance, you can get your car right away and pay back the money you borrowed, plus interest and fees, over a period of time. 

What type of vehicle can I buy with a car loan?

Practically any vehicle can be purchased with a loan, provided the lending criteria allow for it. If the loan is a secured loan, the lender will be able to repossess the car if the borrower does not repay the money. In the case of a secured loan, the lender will decide if they’re willing to lend money against the value of the car. If the car is deemed to be suitable collateral, it can be purchased with a car loan.

If you’re looking to use an unsecured loan (personal loan) to purchase a vehicle, there are no restrictions placed on how you spend the money — in this case, any vehicle can be purchased with the money. 

Generally speaking, you can use car finance for new or used cars. 

How do I compare car loans?

When searching for the right loan for your unique circumstances, there are a few different factors to consider. 

Interest rates

Be sure to check the interest rate on the loan, but keep in mind that the lowest rate won’t necessarily mean it’s the cheapest loan. You need to consider things like establishment fees and monthly charges. Our comparison tool allows you to compare all features of loans side by side from up to three providers, this is a good start. However, you’ll only know for certain (which loan is cheapest) once you get an actual quote and can see all the charges which are included.  

Loan term

Consider the duration of the loan, which can range from one to seven years. Shorter terms mean higher monthly payments but less overall interest. Longer terms reduce monthly payments but increase total interest. Some lenders may have a fixed term with a balloon payment at the end, so check if your payments cover the full loan or if you’ll owe a lump sum later. Choose a term that aligns with your financial goals and income.

Minimum car loan repayments

The minimum repayment will be based on the interest rate and the loan term. Understand the minimum repayment amounts and ensure they fit your budget before moving forward.

Repayment structure

Inquire about the frequency and method of repayments. Check if you can make extra payments or pay off the loan early without penalties. Some loans give you the freedom to make additional repayments (which can help to save interest), while other loans will charge a fee for early payment. For some people, the choice of weekly, fortnightly or monthly repayments will be important for budgeting purposes. 

Fees

Be aware of any fees associated with the loan. Some lenders charge monthly account or administration fees. Establishment fees may also apply. Check for early repayment fees, especially with fixed-rate loans. 

Insurance requirements

Since the lender uses your car as collateral with a secured car loan, they might require comprehensive insurance until the loan agreement is fully repaid. Compare insurance options to save money and find the best coverage for your needs, considering that the cheapest option might not be the most suitable.

Can I purchase a car privately with a car loan? 

You can buy a car privately which will open up your options and the opportunity to get a bargain, however be careful to consider.

• The condition/road worthiness of the vehicle. Get a vehicle inspection check from a reliable provider like the AA.
• Check whether there is finance outstanding on the vehicle (i.e. someone has borrowed to buy it and still not paid it off). Members of the public can use the Personal Properties Security Register (PPSR) to check this.
• Check the market value of the car, you can use TradeMe’s free car valuation tool for this.
• It’s worth having correspondence in writing with the seller agreeing what will happen when you transfer ownership i.e. payment and taking possession, so there’s no confusion.
• You are legally required to advise the NZ Transport Authority when you buy or sell a vehicle, it’s fee and you can do it online. This website has a comprehensive checklist that you should work though to ensure you’ve covered everything.

Ready to apply for car finance? Compare the car loan providers above.