If you’re looking for a new car but don’t have enough money to buy it, you might consider a car loan to finance your new set of wheels.
Generally, getting a car loan depends on a range of factors, including whether your job provides enough income to fund the loan. If you are retired or receiving government benefits such as pension or Centrelink, even if you are not employed, you may still be eligible.
What is a retired auto loan?
Retiree auto loans are designed for retirees or recipients of government benefits, including pension. To service any form of financing, income is needed to meet repayments.
For retirees, as long as you meet the loan criteria and have a steady income – be it investments or other assets, Centrelink payments, disability pension, old-age pension or another type of pension – a retirement car loan could help you unlock your new set of wheels.
How much can you borrow with a retired car loan?
For a car loan for retirees, the amount you can borrow will not only vary from one lender to another, but will depend above all on your personal financial situation.
While you don’t necessarily need to be employed to qualify for a retirement car loan, your options may be more limited than those open to someone who is working. You may have to accept a shorter loan term, accept higher repayments, or face a higher interest rate.
When comparing retirement car loans, you may receive different interest rates from a variety of lenders depending on your financial situation.
Typically, lenders charge less competitive rates on loans considered higher risk.
If you are a retiree and have assets, these could be used as collateral on a car loan to lower the interest rate you pay.
Before deciding how much you want to borrow, be reasonable about your budget. Compare your pension payments to your expenses and be honest with yourself about how much you can afford to repay.
Consider making a down payment to show the lender that you can save money when you receive a pension and potentially improve your credibility with the lender. Borrowing a lower amount could also prove beneficial, meaning you have less to pay in repayments and interest over the life of the loan.
What should I look for in a retirement car loan?
When it comes to a retirement car loan, there are a number of things to consider, including:
Secured or unsecured loans
A secured loan may offer better interest rates, but an unsecured loan may be less dangerous if your financial situation changes and you fall behind.
The lower the interest rate, the smaller the size of your repayments. However, you also need to consider fees and charges to determine the true cost of the loan.
Fixed or variable rates
Fixed rates will stay the same for the duration of your loan, while variable rates will change over the course of your loan depending on market factors. Under favorable conditions, this means that you may end up with a rate that decreases during your loan, but you also risk that rates increase and you have to pay more for your loan.
For retirement auto loans, a fixed rate loan may be more suitable than a variable rate loan because it provides peace of mind about the extent of your repayments.
Fees and charges
Generally, fewer and lower fees are better, but you might find a loan that offers better value over the long term, at the cost of higher upfront fees. A car loan with certain fees can also offer great flexibility in terms of additional payments or prepayments of the loan, which ultimately saves you money in interest costs in the long run.
term of the loan
You will generally pay more interest over a longer loan term, but the size of your regular repayments will be smaller. Lenders may offer better rates to those who can repay the loan in a shorter time frame. Auto loans typically last between one and five years, although some lenders offer seven-year auto loan options.
If you want to buy a used car, it is important to determine if a lender will offer you financing. Many of the most competitive used car interest rates only apply to cars less than about five years old. Some offer financing for up to 12 years – this means that if your car is seven years old, you probably won’t be able to get a car loan longer than five years.
If you are looking for an older car, or even if you want to finance a classic car, you may need to broaden your search.
How to apply for a retirement car loan
Like any form of loan, to apply for a retiree car loan, specific lender requirements must be met. These include:
Applicants must be over 18 to apply.
Applicants must be Australian citizens or permanent residents to apply.
Applicants must have proof of regular income to cover your reimbursements and expenses.
Applicants may be eligible for a Retiree Car Loan if you are receiving Old Age Pension, Disability Support Pension or Centrelink payments such as payments for parents or carers. Some allowances, such as JobSeeker, Youth Allowance and Austudy may not be eligible, and you may need to provide proof of additional income.