auto loan

How to Buy a Car with Finance

Whether you’re wanting to buy your first car or need to upgrade to a seven-seater, car shopping can be expensive. Instead of waiting years to save up enough money, some people find that buying a car with finance is the best option.

To help you understand how the process of financing a car works, we’ve summed up the basics below.

What does it mean to finance a car?

When a person finances a car, this means they’ve taken out a car loan to make the purchase. The money can be borrowed from a car dealership, a bank, an online lender like QuickCash, or credit union. The buyer is able to borrow the money on the condition that they pay it back in instalments over a specific period, usually with interest.

Is it best to get a loan from a dealership or lender?

If someone finances their car through a dealership, the dealer organises the loan for them. Some people choose this option merely because it’s a simpler process, but it isn’t always the cheapest. As the dealer is essentially in full control, they get to organise the details of the contract. The customer has to trust that it’s the best deal for them. Unfortunately, some dealers may increase the cost of instalments to make a profit for themselves, which will end up costing the customer a lot more than it should.

Alternatively, if a customer wants to arrange the details of the loan themselves, they can borrow money from a lender such as a bank, online lender, or credit union. Quickcash are always happy to chat about car loans as well. If the loan is approved, the customer can take the borrowed money and pay it in full to the dealer. In doing so, the customer can feel confident in knowing precisely what their interest rates are and how their loan is set up. This type of financing is also likely to cost less as there’s no possibility of the payments being marked up by the car dealer.

How do I apply for car finance?

Just like with any loan, an application form needs to be filled out before a lender will hand someone the money to their new set of wheels. While each lender may have slightly different requirements, all forms are likely to require similar information. We’ve put together a list for you below.

Details of the car

The lender will need details of the vehicle that is being purchased. If the customer is still in the beginning stages of car shopping, they’ll still need to give a general idea of the year, model and make of the car they’re looking for.

Size of the loan

The details of the car can help to estimate its value. The customer and lender both need an idea of how much money will need to be required to make a purchase.

Current financial status and commitments

By providing information such as bank statements and payslips, the lender can evaluate if a borrower will be able to pay back the money borrowed. If their expenses are much higher than their income, the lender may not think that the car can realistically be paid back. With a higher risk, the car loan is unlikely to be accepted.

Length of the loan

The applicant will need to state how frequently repayments can be made. The options for payments are generally weekly, fortnightly or monthly. This information will help lenders to determine the structure of the loan.

Address and driver’s license

By providing an address and driver’s license, this confirms to the lender that the borrower is who they say they are. Attempting to secure a loan with someone else’s details is a bad idea.

Current assets

An asset is an item that someone owns that is of considerable value such as a piece of real estate, a boat, or a car. If someone is applying for a secured car loan, the lender will need to know which asset can be used as security. This security means that if the borrower isn’t able to repay them, the lender can take ownership of the asset and sell it to get the money owed. Usually, when someone takes out money to purchase a car, they will use the vehicle itself as security. If they can’t pay back the loan, the lender will repossess the vehicle.

buying a car with a loan

Tips for buying a car with finance

As mentioned above, a secure car loan gives the lender reassurance that they’ll be paid back. Having this security means that the interest rates will likely be lower as well because the loan has less risk. Those who choose to finance their car with a secured loan are therefore generally going to save money on interest.

For more information about interest, read our article: “How Does Interest Work on a Loan?

When taking out a car loan, people generally benefit from reviewing their budget first. Knowing that there’s enough room amongst existing finances to make repayments will help the automobile financing process be stress-free.

The idea of budgets can sometimes go out the window when the car shopping begins. As tempting as the latest model can be, many borrowers find it best to look for a more manageable purchase.

In addition to considering their budget, any car shopper will benefit from keeping in mind the factors listed below.

History of the car

This information is particularly important to buyers who are purchasing it from someone online, as it can check if the vehicle has been stolen or not. Buyers can verify this information in an affordable report from Carjam.

Warrant of Fitness (WOF) & registration

It is standard that when cars are sold in New Zealand, they have a current WOF and registration (rego). If the buyer doesn’t have them or refuses to acquire one, this could be seen as a red flag. The laws around selling vehicles in NZ require vehicles to have both at the time of sale.

Recognise the running costs

Buyers on a tight budget will benefit from researching how much the car will cost over time. Look at how fuel-efficient the car will be, maintenance and repair costs, and insurance premiums. If someone buys a vehicle without looking into the associated expenses, they may struggle to afford it in the long-run.

Purpose of the car

Think about the purpose of your vehicle when deciding what to buy. If you are driving daily, a lighter car generally requires less petrol. If you travel on dirt, gravel, or snow often, a four-wheel-drive car will help you avoid accidents or getting stuck. Choosing the right vehicle for your needs can save you money in the long run.

Test how the car feels

The fun part of car shopping is the test drives. Make sure you take advantage of the opportunity! Doing so helps to ensure you’ll be comfortable using the vehicle daily. Check how it feels to maneuver into parking spaces, reverse around corners, and go over bumps.

Check if the vehicle is up to standard

If the buyer has a car-savvy friend who can look over the vehicle, they can help to examine if they think it’s a good purchase. For a more comprehensive assessment, a qualified vehicle inspector will need to test it. You can book a pre-purchase vehicle inspection from the AA.

That’s everything you need to know about financing your car. If you have any questions or want to apply for a car loan don’t hesitate to call us on 0800 784 252 or apply online now.


Disclaimer: This article is intended to provide general information only. It does not take into account your financial needs or personal circumstances. It is not intended to be viewed as investment or financial advice. Should you require financial advice you should always speak to an Authorised Financial Adviser.