The process of obtaining a car loan, including what issues to consider when looking for a lender, comparing packages, getting pre-approval, and finalising your contract.

Depending on your circumstances, organising a car loan in Australia can be a relatively simple or complicated task. Car loans tend to be a little more complex than cash loans or other small loans. While it’s not necessary for you to become an expert on car financing to choose the right loan, it’s useful to know the process and have some basic knowledge of the key issues associated with choosing a package and getting approved. Here are the top issues to understand before you sign on the dotted line and drive off in your new car.

1. Start by Doing Research

Don’t rush into it. Car loans are usually not fast loans. Always begin by doing some research to see what packages are available and the kind of financing structures that are available. There are hire purchase agreements, lease agreements, personal loans, and other types of financing structures, but a secured car loan is one of the most common structures for financing a car purchase. Once you’ve done some basic research, it’s time to get some quotes.

2. Get Some Quotes

Give your shortlist of lenders a quick call and ascertain if they are able to provide what you have in mind. It’s always convenient to get quotes in writing so you can compare the packages in your own time. Always choose a package to suit your budget. Be aware of the following issues:

• Loan Term – what are the loan terms available and are they able to accommodate you?
• Loan Conditions – are there any additional loan conditions
• Rates and Fees – what are the applicable fees and how will the rates be calculated?
• Timing – does their timing suit your plans? How quickly can you drive away?
• Service – what is their scope of service?
• Voluntary Repayments – do you pay retained interest (penalties for early payout)?
• What’s the average monthly figure you have to pay? This is very useful to know when you sit down to compare your quotes.
• Flexibility – how flexible is the package and the lender and does it fully accommodate your requirements?

3. Submit an Application and Get Approved

Most lenders will probably not require you to have already arranged a car purchase. You can usually obtain a pre-approval before you begin shopping, which allows you to negotiate and know your financing issues before you finalise the decision.

Many lenders will allow you submit an application online or by phone, during which personal, employment, and financial information will be required. The lender will also ask for supporting documents to verify your identity, income, and financial status. Lenders will consider your loan history, your ability to make payments and take your current assets into account. Pre-approvals can be granted instantly or in a matter of hours.

4. Find a Car

Once you’ve obtained a pre-approval, you can proceed with finding a car. Make sure you have an expert conduct checks on second hand cars. After you finalise the sale conditions and sign the contract, you’ll need to finalise the financing. This generally involves you passing on some more information to your lender, depending on whether you’re buying from a private individual or a company. Copies of the tax invoice and other sale documents may need to be forwarded to the lender. Once that has been done, the lender will send you some finance documents for signing, along with proof of insurance that confirms to the lender that you have arranged for insurance. Upon the lender paying the dealer, you are free to drive off with your car.