The term of a motor vehicle finance deal is the time it will take for the borrower to repay the loan in full. Lenders can display terms as years or months. So, should buyers be looking for the longest or the shortest terms to repay their vehicle finance? What is the Goldilocks or best car loan terms? While many vehicle buyers seeking finance will typically consider the interest rate and their deposit requirements, possibly less attention is paid to the financing term.
The term of a loan can have a significant impact on many aspects of the financing and potentially even on the credit score of the borrower. There can also be benefits from both shorter and longer financing terms. While the buyer’s preference for their best finance term car loan is up to lender approval, buyers can prepare ahead of time by planning their preferred term to repay their loan.
To guide buyers in determining their best motor vehicle finance term, we provide an overview of the impacts of the term, calculating car loan terms, and our we may assist both individuals and business owners achieve the most suitable repayment term.
How Car Loan Terms Affect the Finance
The impact of repayment periods on finance basically include:- when the buyer will have full ownership of the vehicle, how much the monthly repayments are, and on the total interest payable on the loan. Motor vehicle financing terms can vary from 1 years or 12 months, up to 7 years or 84 months. The longer the repayment period, the longer it will take to own the vehicle.
The monthly repayments involve the amount of the loan, the interest rate and the period over which the loan is taken. A shorter repayment period will result in larger monthly repayments compared with a longer repayment period. Borrowing funds over longer repayment periods can accrue more interest in total, compared with borrowing over a shorter period. This can increase the total acquisition cost of the motor vehicle.
Deciding the Best Car Loan Terms - Considerations
So, what should you consider when deciding on your Goldilocks repayment period? Business owners can have different reasons from individuals taking on personal car loans. But a universal reason can be budget – achieving a repayment period which delivers a monthly repayment amount that works with budgets. A term that makes buying a new car an affordable option.
The ownership issue may come down to personal preferences, but there is also any effect on the credit profile to consider. A longer term leaves the commitment on the credit profile for a longer period. Lenders review both personal and business balance sheets and credit profiles when assessing loan applications. If loans for other purposes are planned during the time the vehicle is being paid off, this should be considered.
Another angle on the ownership issue can be how long buyers intend to keep the vehicle being financed. Lenders can apply fees for loans that are finalised before the end of the agreed fixed repayment period. Opting for a financing term in line with plans for upgrading can avoid any fees and may provide a better outcome with any resale or with the trade-in.
For those seeking certainty, our business financing products and Personal Secured Car Loans attract a fixed interest rate and fixed terms to provide for fixed monthly repayments. So whatever repayment period is achieved, there would be no change to the amount paid each month with rate changes as per RBA rate changes.
Private buyers taking on a Secured Car Loan also have the option of being able to make extra payments on top of the regular monthly requirements. This effectively reduces the amount of time to finalise the loan, with only minimal fees applying.
The amount borrowed is a direct effect on the monthly repayments. If affordability is a key factor, buyers can consider making a larger deposit to reduce the amount needed and hence reduce the need for a longer repayment term.
Using a Calculator to Decide Your Best Car Loan Terms
Now to the practical calculations of deciding preferences for motor vehicle finance repayments. Before applying for finance and even before deciding which vehicle to purchase, buyers can use our Car Loan Calculator to work out their loan preferences.
All values entered can be varied to arrive at the repayment amount that suits the budget. The length of the term can be varied to see how that changes the repayment. Terms available up to 7 years for some applicants. Make sure the interest rate for the credit product required is entered.
Getting the Best Car Loan Terms
While buyers can have their preferences with repayment terms, ultimately it is up to the lender for approval. The way lenders assess and approve applications varies across the market. Using the services of Jade Car Loans, buyers can have the most suitable lender selected as a move towards having their best car loan terms approved. We have access to over 80 lenders, ensuring we can match each buyer with the most suitable lender. And your Jade broker will handle the negotiations to achieve the most suitable financing with the most suitable terms and repayments.
To have an expert source your finance with the best car loan terms, contact Jade Car Loans 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.
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