Planning to buy a car on finance? Before you sign on the dotted line, it's essential to familiarise yourself with the rules and regulations governing car financing. Here are some important things to know:
1. Interest rates and fees: Understand the interest rates offered by lenders and compare them across different financial institutions – if you’re using a broker (like Lendy) they can normally assist with this. Be aware of any additional fees associated with the loan, such as any early repayment penalties and monthly maintenance fees.
2. Credit checks: Lenders in NZ typically conduct credit checks before approving a car loan. Ensure your credit history is in good order to increase your chances of securing favourable financing terms.
3. Loan term: Consider the length of the loan term. While longer terms may result in lower monthly payments, they can also increase the total interest paid over time. Choose a term that aligns with your financial goals and ability to repay the loan.
4. Down payment (deposit): Determine whether a down payment is required and assess how much you can afford to put down. A larger down payment can reduce the loan amount and lower the monthly payments.
5. Repayment flexibility: Check with your financial specialist if the lender offers flexible repayment options. Some lenders allow you to make larger lump sum payments throughout the term of your loan, while others require you to specify how much additional payments you'd like to make and when. This could help you save on interest charges.
6. Insurance requirements: Most lenders will require comprehensive insurance coverage for the financed vehicle. Be sure to research insurance options and factor the cost into your budget – you can check out the insurance options Lendy has available here.
7. Consumer Guarantees Act (CGA): Familiarize yourself with the protections provided by the CGA. It covers situations where the car does not meet the guarantees of acceptable quality, isn't fit for purpose, or doesn't match its description.
8. Loan protection insurance: Consider loan protection insurance (also referred to as Payment Protection Insurance), which can provide financial security in case of unforeseen circumstances such as unemployment, disability, or death.
9. Early repayment options: If you plan to pay off the loan early, understand the lender's policies regarding early repayments. Some lenders may charge a flat fee, while others will request you pay a percentage of the remaining interest. Each lender is different so it's best to understand this before you take out the loan.
10. Seek professional advice: When in doubt, consult with a financial advisor. They can provide personalised advice based on your financial situation and help you make an informed decision.
By understanding the rules and regulations surrounding car financing in New Zealand, you can navigate the process confidently and secure a car loan that suits your needs. Remember to carefully assess your financial situation and obligations before committing to any financing agreement.
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