Welcome to Lesson 3 of Car Loan University 🎓
Today's learning objectives are:
How to choose the right car loan term
Discovering the on-road costs of buying a car (including an electric vehicle)
How to choose the right car loan term for you
Car loan terms generally range from two to seven years. With regards to choosing a term, the basic principle is this:
The LONGER the loan term, the lower your monthly repayment, but the higher your interest charges over time. Inversely, the SHORTER the loan term, the higher your monthly repayment, but the lower your interest charges over time.
The key is to identify a repayment amount you can afford, while simultaneously keeping your interest and fees exposure to a minimum.
Compare car loan terms and repayments
You can see from this table that increasing the loan term decreases the monthly repayment amount:
When you get a car loan through My Finance Agent, we crunch these numbers for you, and help you find the sweet spot between an affordable repayment figure and keeping your interest costs down.
Understanding on-road costs
While we're talking about budgeting for car loan repayments, it would be remiss of us not to mention the other costs of car ownership. Your loan payments are only part of the picture.
Registration
The cost of registration varies by state and vehicle type. On average, registration fees could range from $700 to $1,300 per year, including Compulsory Third Party (CTP) insurance.
Insurance
The cost of comprehensive car insurance will depend on the car's value and your driving history. The average annual cost is about $1200. Note that most car loan lenders will require borrowers to take out a comprehensive policy.
Petrol
At the time of writing, the average annual cost of petrol is around $2,160, but this can fluctuate with fuel prices, vehicle type, and driving habits.
Roadside Assistance
An annual plan costs from about $100, providing services like towing, battery jump-starts, and emergency fuel.
Maintenance Costs
Regular maintenance, including oil changes, tyre rotations, and brake checks, cost Australian motorists around $1,500 per year on average.
Stamp Duty
This state-based government tax is based on the purchase price of your car. Duty can range from about 3%, depending on type of vehicle, its value, and location.
Other Costs
Don't forget to budget for tolls, parking, potential fines, and repairs.
By understanding these costs and choosing the right loan term, you can make a well-informed decision that fits your budget and lifestyle.
Got questions? Call and talk with a lending expert on (02) 8313-8400 or request a call back.
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