Whether you are single, have a partner or have a family, for many of us in New Zealand, a car is a necessity instead of a luxury. You may use it for work or general travel with the family; therefore, it is essential to consider a reliable and sturdy vehicle. The vast majority of new and second-hand cars in New Zealand are bought using a range of different finance options. However, if you have experienced financial difficulties in the past and your credit rating has been impacted, raising the necessary funds might be challenging.
Here at Quick Loans, we take a pragmatic approach to fast loans for cars. Unlike many financial institutions, we treat you as a person, not a number and all applications are reviewed by humans. However, if you are looking to buy a vehicle, there are several issues to be aware of to avoid any unwanted surprises further down the line.
Check out these five helpful tips before you decide to get a New Zealand car loan.
Assess if fast loans for your car are the suitable options
Firstly, even though we offer fast loans for cars, do not be under the impression that our financial checks are any less stringent than with a traditional loan. Any car loan must be structured in such a manner as to appreciate your specific financial position. Some of the more common questions you should ask yourself include:-
Does my current budget support a car loan?
We will cover this in more detail, but you need to consider whether your current and future budgets will be sufficient to cover loan repayments. If you foresee any changes in your finances as you advance, you must consider these. While this often makes people think of negative changes, it may be that your finance will improve in the short to medium term.
Can I raise partial funds elsewhere?
The lower the level of finance required for a vehicle, the lower your instalments. For those with a complicated credit history, it could help your chances of approval if you had additional funds or assets you could use. In many cases, those looking for a new/second-hand vehicle often have an existing vehicle they can trade-in. Even a partial deposit could significantly impact your car loan application.
Does my credit history support a car loan application?
When looking at car loans in New Zealand, your credit history will be considered. Quick Loans is positioned between the traditional banks and payday lenders, offering competitive rates between 9.95% and 23.95%. If your credit history is challenging, you may wish to consider adding a guarantor to your application to improve your chances of success. We can discuss these issues in more detail when you are ready.
What happens if I have no credit history?
Those looking to acquire a car at a relatively early age will likely have a limited credit history. In some cases, no credit history can be as damaging to your application as a challenging credit history. However, help is at hand!
If you literally have no credit history, it may be an idea to consider a trustworthy guarantor who will act as a backup if you experience financial difficulties. As the guarantor’s financial strength is taken into account, this will have a positive impact on interest rates for successful applicants.
Identify whether a car you are planning to buy is a need or want
Even though many of us may have a “dream car” in mind, choosing vehicles that best suit our situation is vital. For example, do you actually need the car, or is it something you want?
Some of the specific issues to take into account include:-
Size of the vehicle
When looking at size, we are considering both the physical size and the engine capacity. For example, if you require a vehicle for your family, you will need to look at larger vehicles. Those looking to buy a car for business use will need to consider expected mileage per annum. The physical size and the engine capacity of any vehicle will have a significant impact on the price.
Age of the vehicle
When applying for fast loans for your car, we will consider the age of the vehicle. Your ideal car/vehicle would be no older than 13 years in a perfect world. However, developments in technology mean that many vehicles will last well beyond 13 years. You may need to offer additional collateral to reflect potential reliability issues in this situation.
The New Zealand car market is no different to anywhere else in the world; your vehicle will depreciate in value from the moment you buy it. Consequently, it is essential to consider levels of potential depreciation, especially with new vehicles. Even though a new car should be more reliable than an older vehicle, depreciation can be significant in the first few years. Something to consider!
This is just a flavour of the issues you will need to consider when looking to buy a car or other type of vehicle. While it can be tricky to balance the reliability factor with expected depreciation and annual mileage against different kinds of cars, these must be considered.
Figure out how much you can afford
It is relatively simple to work out how much you can afford with a fast loan for your car. Sometimes, it is easy to get blinded by your dream vehicle and bury your head in the sand concerning affordability. However, as you will likely be paying back the loan for a minimum of three years, you must be honest about affordability.
Regular income and expenses
Before applying for a car loan, it is advisable to sit down and brainstorm your finances. Write down your current regular income and any expected changes in the short to medium term. For example, you may have recently become unemployed but could have several options in the short term, which could see you return to the employment market. While it is essential to take a proactive approach, it is also important to err on the side of caution.
To make a car loan affordable and comfortable, you must factor in a degree of “spare capital” into your calculations. To do this, you will need to review your regular expenses, which might include:-
• Rent/mortgage payments
• Food bills
• Travel expenses
• Utility bills
• Phone costs
• Emergency fund
• Loan repayments
Even though we all have very different lifestyles, incomes, and expenses, it is challenging to escape many of the above charges.
Car loan repayments
The level of car loan repayments will depend upon the initial finance, interest rate, and loan duration. Many of us tend to go for the shortest loan possible even though this will bump up monthly repayments. It may be sensible to consider reduced monthly repayments with a longer duration while also taking into account additional interest charges. You may be able to afford that vehicle you need/want by simply extending the loan term.
It is essential to be realistic and not to lose sight of why you need/want a car.
Do my finances support a car loan?
Once you add up all of your expenses and compare and contrast them with your income, it will very quickly become evident whether you can afford a car loan. It may be that without a vehicle, your employment options will be limited, which would impact your income. Some of these considerations are not easy!
Research and compare deals
It goes without saying that you should do your research and compare and contrast various deals available at the time. To be forewarned is to be forearmed; you need as much detail as possible before considering negotiations with a car dealership!
The Internet has become a godsend for New Zealand consumers looking to acquire a new or second-hand vehicle. You can compare and contrast various deals online at your convenience, 24 hours a day, seven days a week. However, while this type of research is advantageous before entering negotiations, there are other issues to consider.
Take your time!
Many of us can become dazzled when we spot that dream vehicle, and sometimes it can be easy to ignore essential checks. Whether you are looking to buy a car for $5000, $10,000 or $20,000, this will significantly impact your finances in the foreseeable future. Take advice where applicable and take your time.
Second-hand or a new vehicle
As we touched on above, improvements in-car technology and designs have greatly extended the life of vehicles today. However, it is still important to appreciate the cost, reliability, depreciation, and performance when considering a second-hand or new car.
While many websites will offer guidance on buying a car, if you have any friends who are car mechanics or have a keen interest in vehicles, ask them for their opinion. In a perfect world, ask them to come with you to give any potential vehicle purchase the once over.
Many car dealerships will offer additional extras to tempt you when looking to close a deal. However, many people have found out to their cost, at a later date, that these additional extras were not as attractive as they first seemed. In many cases, it may be cheaper to negotiate a discount on the cost of the vehicle and purchase any additional extras separately. If a car dealership is forced to give a discount on the price of the vehicle, they will look to make it up elsewhere!
Private or commercial transaction
So far, we have focused on car dealerships and commercial transactions, which tend to offer a greater degree of reliability and honesty. However, there may be an option to acquire a vehicle via a private trade with another member of the public. Unfortunately, this type of scenario tends to be a breeding ground for fraudulent activity. Structurally defective vehicles, stolen cars and fraudulent paperwork are just some issues to be aware of.
In general, you would expect to pay a little more when acquiring your vehicle from a car dealership, but sometimes that little extra is worth the peace of mind.
What happens if your financial situation changes?
With the best will in the world, the majority of us will, at some point, experience a significant change in our financial situation. Again, when we mention this, we tend to look at the negative side. However, in many cases, the finances of an individual or a family can often improve. So what should you do if your financial situation changes?
Reduction in income
This is where the headroom we discussed earlier comes into play. If, for example, you had a theoretical income surplus of $200 a month, after taking into account all expenses, unexpected costs may not be such a problem. However, on the flip side, if you have no theoretical income surplus each month, any unforeseen expenses could be catastrophic.
If you foresee any short, medium or longer-term issues with your income, you must approach your lender sooner rather than later. Once you begin defaulting on payments, there is limited scope to adjust your current finance arrangement. However, if you approach your lender as soon as you foresee any issues, extending the loan duration may be an option to reduce payments.
Increase in income
Those experiencing an uplift in their income may wish to consider increasing their monthly car loan repayments. This would mean repayment of the loan is much quicker, but the interest charged will also be reduced. As any additional payments would be above and beyond the minimum repayment, they would be optional, and you could stop them at any moment.
As a rule of thumb, you should review your finances on an annual basis to identify potential savings or ways in which you can increase your income.
If you are still confident you can afford a car loan after taking into account all of the issues above, we would welcome the opportunity to chat. We take our responsibilities as a lender very seriously and pride ourselves on being honest and upfront about your application. Even if your initial application was rejected, there might be ways in which you can adjust your finances or the terms of any car loan. Whatever the scenario, we have a duty to be brutally honest and tell you if your loan application is unaffordable.
We prefer to take a long-term approach, building a relationship of honesty and mutual trust. The more information we know about you and the greater your understanding of our services, the more chance of a successful loan application.