Question 1: What is the long term financial cost?
Getting your first car is exciting, but a big financial responsibility. One of the most common ways to help pay for this asset is using a car loan.
Loans can be a complicated document if you don't understand them, and may put you into financial stress if you aren't aware of how they work. Before you go shopping for your first car, be sure to ask yourself these three essential questions that will give you a better idea of how a loan works, and if you're ready for one.
No doubt you've already calculated how much you can afford for your first car, but it's important to understand the cost of owning a vehicle goes beyond the initial price tag. A loan won't cover anything other than the price of the car itself. That means you have to calculate the initial start up costs like the registration fee and stamp duty, as well as consider the routine costs like regular vehicle maintenance and services, insurance premiums and ongoing petrol costs, and add them in with the loan.
Is that something you can afford? If you get a loan, you have to be able to pay it off on the terms you agreed to. Falling behind or missing payments entirely will affect your credit score, and once that's damaged, it can take a while to repair - specifically, you need seven years of perfect payments to bring your score up again.
Question 2: How does a car loan work?
Once you've determined you can take on the additional financial responsibility, it's time to understand exactly how a car loan works. Basically, a car loan allows you to borrow money over a certain amount of time (aka a term). During this term, you have to pay back the lender that money with interest.
You can pay your loan back over a fixed or variable rate. Just like it sounds, a fixed rate means the amount of interest you'll be paying is locked in for the term. However, this can be an issue for those who want to pay out the loan early. A variable rate, on the other hand, means the rate you pay might change over the term, so though you have less control over the interest, you can pay the loan off a bit more flexibly.
Interest rates are subject to change without notice. Terms, conditions, fees, charges, and normal lending criteria apply. Full details are available at the time of application or by contacting us.
This information has been provided without taking into account any of your objectives, financial situation or needs. You should consider whether it is suitable for your circumstances before acquiring this product.
All loans are provided by Beyond Bank Australia Ltd ABN 15 087 651 143 AFSL/Australian Credit Licence 237856. © 2023.