While a lot of emphasis is placed on interest rates, all elements of a car loan should be closely considered in the decision-making process. That includes the interest rate as well as the car loan term. The rate, the loan amount and the term work together to determine the monthly repayment figure. A figure that can be the most significant number for many buyers
Most buyers will have an idea of what repayments they can afford or want to pay in monthly commitments when purchasing a car with finance. A figure that has to work with their budget. Buyers can use a car loan calculator to work out what rate, amount and term is required to deliver their preferred repayment amount.
But what most may not know is how to go about actually achieving their preferred loan structure. The big unknown is - how much say applicants have in getting approved for the car loan structure that they want. Can loan applicants stipulate the car loan term they want? Do applicants always get what they want or is the decision completely up to the lender?
For those looking for answers to these questions and for those who have not given much thought to the loan term, we cover the importance of the car loan term to vehicle finance and how buyers may achieve the term they want.
Why the Car Loan Term is Important
As indicated above, the car loan term, the amount being borrowed, and the interest rate together determine the monthly repayments. The loan term directly impacts the repayment figure. A longer car loan term results in fewer monthly payments. A shorter car loan term results in higher repayments.
A shorter term means the car will be wholly owned sooner than with a longer term. The debt will be repaid which may be a favourable position for anyone seeking to take on further finance with other major purchases. Lower debt levels may improve credit profiles also.
For those seeking to keep repayments within budget, the term can be the number to focus on. To see how this works for the car being considered, simply use our Business Car Finance Calculator.
How Car Loan Term Impacts Repayments, Interest
The loan term impacts the monthly payment figure but it also affects the total amount of interest payable. While a longer car loan term – an additional 12-24 months, may deliver a lower monthly outgoing, the total interest payable will be greater than for a shorter term.
The higher interest total on the purchase then adds to the overall cost of the car purchase. This a factor that buyers can consider when planning to finance their next vehicle.
Lender Approval Guidelines
The motor vehicle lending market is vast. The banks, finance companies and other loan sources can have variations in the guidelines they use to approve applications in general and to approve customer preferences regarding loan structure including the car loan term.
What lenders look for when approving car loan applications centres very much on creditworthiness. The credit profile forms an integral component of the approval process, especially for consumer finance. Good credit rating applicants are typically offered better interest rates. This is noted in that the lowest business car financing rates advertised by lenders unless specified otherwise, will typically be for new vehicles and good credit-rated applicants.
Are lenders open to negotiating on car loan terms? Buyers should appreciate that responsible lenders must abide by the Consumer Finance Laws as regulated by ASIC. Those guidelines can have a determining effect on what they will and can’t approve.
The vehicle itself can also play into the approval process, especially with used cars. The price of the car, the value, age and condition and the loan amount being requested about the creditworthiness and financial position of the applicant are considered.
This can bring in decisions around whether or not to apply for no-deposit finance or to pay a deposit to reduce the amount being applied for.
Not all lenders will be open to negotiating directly with customers. When it comes to achieving the car loan term preferred, buyers can engage Jade Car Loans broker-style services to handle negotiations with lenders. With our buying power, direct lender connections and expertise, our consultants are well-placed to assist in not only achieving better rates but also negotiating terms to deliver the best possible outcome.
Calculating and Achieving a Better Car Loan Term
Using our services can be of great assistance to all types of car buyers both private and business. Take advantage of our calculator to work out preferences and contact us to handle the entire car financing process. Buyers wanting assurances on the finance before committing to a purchase can request pre-approved finance.
To utilise our services to source car finance and negotiate on the car loan term, interest rate and other conditions, contact Jade Car Loans at 1300 000 003.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.