It might seem to be the natural thing to do by applying for a car loan at your current bank. But the fact remains that the best deals may be available somewhere else. As banking in Australia begins to return to normal following the global financial crisis, more and more lenders are coming into the car loan market and the deals are getting more competitive.
Every bank has its own range of lending products, but interest rates and conditions are reviewed constantly. What is advertised as a competitive rate one week may not necessarily apply in a few weeks time, so it’s probably a safe bet to ignore newspaper and television advertising!
The problem is, you will never know how competitive your bank is until you get a quote and then compare it with other prospective lenders in the market. Whilst it is true that banks want to offer more competitive products to their existing customers, it is not always possible for them to do so. It is also a false belief that bigger banks can offer better rates. Many banks capitalise on this consumer belief and may actually charge their customers a higher rate than they might obtain somewhere else.
The bottom line is this: don’t believe the advertising and don’t believe the hype. Bigger is not always better.
The only way to ensure that you get the best and cheapest car loan is to find out what other lenders have to offer before you make your decision. Here is what you can do.
- Work out exactly how much you are willing to pay in monthly loan repayments. This might require doing a budget before you work it out but it could be the best few hours you spend in your life. Living within your means gives you peace of mind, so don’t be tempted into borrowing more than you want to, even when the bank tells you they are willing to lend you more.
- Once you have worked out your monthly budget and you know exactly how much you are prepared to spend, it’s time to hit the lending trail and work out exactly what each lender’s loan is going to cost you per month. Remember to include not just the monthly repayments but also any ongoing fees plus application fees, legal fees, settlement fees or documentation fees that the lender is going to charge you. This is the only way you will know exactly how much you have to borrow because the lenders will package all these fees into the loan amount and work out the monthly repayment from that total.
- Don’t be tempted to pay extra per month to borrow that little bit extra. Stick to your budget and make sure your monthly repayments are no more than what you initially decided on.
Going to your existing bank is a great place to start looking for car loans as long as you don’t expect the best deal. Shop around and do the figures first and you might get a pleasant surprise.