As Australians dust off their cars for their daily commutes after months of lockdown, car spending is set to pile up.
Record gasoline prices are partly to blame, but auto loan repayments are also a major contributor to transportation costs.
So here are some ways to cut them.
Evaluate Your Options
Savvy Finance founder and CEO Bill Tsouvalas said one of the biggest mistakes car buyers could make is not comparing their loan options.
He said people should look beyond their current bank or dealer to find the best deals.
âI think comparing the options is really important,â Tsouvalas said.
“That they do it through a broker, [or] online via a comparator, [or] call three or four car loan companies and get quotes.
Take your credit score into account
Mr. Tsouvalas said it was important to stay on top of your credit score.
“The higher your credit score, the lower your interest rate. [will be] from a car lender, âhe said.
People can easily access their credit scores online the same way they would for a home loan.
CarClarity Founder and CEO Zaheer Jappie said a little-known danger of applying for multiple loans is the negative effect it could have on your credit score.
Mr Jappie said that applying for multiple loans in a short period of time will lower your score as the majority of lenders do a rigorous credit check.
He said using a third-party site like CarClarity to find the right loan would reduce the risk of affecting your credit score.
Look for the exit
Mr. Tsouvalas said that while one of the best ways to save money on your car loan is to pay it off quickly, some lenders charge an early exit fee.
So he recommended looking for a loan facility that charges low or no exit fees if you plan to pay off your loan in three years instead of five.
Mr Jappie said that even though you are charged an exit fee to pay off your loan early, it still makes sense to pay the one-time fee instead of the higher interest charges you would otherwise face.
Mr Jappie said refinancing is a great option for people with new car loans who want to lower their repayments or lower interest rates.
âA one or two year car loan is probably the best time to refinance,â he said.
âAs a rule of thumb, in the first couple of years you can probably get a better rate, maybe half your rate. “
Do your research
When buying a car, people need to develop a good understanding of how much they can afford to spend, Jappie said.
He also said people should resist “instant in-store pressure” to get a loan directly from their bank or regular dealership, and do as much research as possible to cut costs.
Mr Tsouvalas said buyers should research the resale value of their car’s make and model and be careful not to rush the car buying process.
âMistakes happen when people just don’t take the time to research,â he said.
âIt is essential to slow down the process, to do adequate research and to compare the options. “