Getting back to the basics of your Vehicle Financing Terms
Just like any industry we have our own jargon and technical language, (you should hear our tearoom conversations!), we love what we do and we love to “talk shop.” However, sometimes it’s just good to go back to the basics. Read our simplified guide below of what you should consider when deciding how you want to pay back your vehicle loan.
When setting up a vehicle loan, a common question you’ll always be asked is, “what deposit do you have?” Here the lending agency is asking about how much money you’ll be putting towards an initial upfront instalment. This is different from your regular repayment plan where smaller amounts are paid over a set period.
Why a deposit? Lending agencies take on a certain amount of risk when they release funds on your behalf in the expectation of repayments over a period of time. The higher the deposit, the lower the risk carried by the lender. Having a deposit makes your loan application more appealing and it helps to start you off on the right foot when it comes to paying back your loan. Have a go at using Oxford Finance’s loan calculator
, to see how a higher deposit can reduce the length of time you’ll need to make repayments for.
How much and how often
The next decision you’ll have to make is what vehicle financing terms will work best for your lifestyle and budget. Essentially this is: 1) how much money will you pay in each instalment? 2) how often will you make this payment? 3) and, how long would you like to take to pay back the loan?
Choosing repayment terms is about working out what balance is right for you. A longer term contract will reduce the amount you pay at each instalments, often making the repayment schedule more manageable. While a shorter term loan requires the discipline of meeting higher regular repayments, it will reduce the time it takes to pay it back and impacts the total interest you pay on the loan. Our clients are often surprised to find out how much their total interest decreases when they can make small increases in regular payments.
After years of helping kiwis into vehicles, we tend to give this advice; choose the middle ground. While aiming to pay back your loan in the shortest time period possible is excellent, we suggest that you do take the time to sit down and review your weekly income and spending. How much is left over at the end of each week? And, how much of this can you put towards your vehicle repayments?
Also consider aspects, such as how long will you want to own the vehicle before you’ll be looking to change? Are you planning to trade in your vehicle at a future date? Your answers to the above, are helpful points to consider when choosing the right repayment plan for you. Not sure, what will work best for you? Chat to one of our Vehicle Finance Specialists
Just like choosing the right wheels, when it comes to interest rates it’s good to make sure you’re getting a fair deal. Not all finance companies are alike when it comes to what interest rates they charge. And, in the same way, not all borrowers are alike. Interest rates are generally derived from assessing credit risk. That’s why a good repayment history will help you to gain access to better interest rates.
Here’s a tip: to drive that interest down consider making additional one-off loan repayments. Let’s be honest, when we get that unexpected windfall or a bit of spare cash, paying down a loan is generally the last on our list of what to with it. But if you do the math, either through our calculator
, or by talking to our team
, you’ll see that when putting it towards an early extra repayment, that money will actually multiply in value through savings in interest.
To find out more about what you can do to get the best interest rates in town, book in a chat with one of our Vehicle Finance Specialists
Take your time
Most of all, we recommend take the time to find out your finance options before you’re in the car dealer’s office with a shiny pen in hand and the new car keys just within your reach. Doing your homework and working out your budget beforehand will help you to drive away confident that you’ve just made the right financial decision for you and your family.
And once you’re ready, our team can turn your finance request around - pretty darn quickly! (If we do say so ourselves). Our approval could be as quick as a few minutes, and with conditions being met, your money paid out on the same day.
Kickstart your journey to successfully manage risks, and simply meet your financial needs by using Oxford Finance’s loan calculator. For further questions and concerns, get sound financial advice from your local Vehicle Finance Specialist.