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Car loans and car purchase

Do your research and have a pre-approved car loan when purchasing a vehicle

Before purchasing a car it is a good idea to do some research. The extent of the research required will depend on whether the car purchased is a used car or a new car.

There are advantages as well as disadvantages when buying a second hand car. It will obviously cost less to buy, but the car could potentially have mechanical problems which may later incur additional costs.

Buying privately means there is no warranty, no security of title and no legal standing if the car purchased proves to be a mechanical disaster. Buying a car from a dealer will generally reduce the above risks. Warranty on used cars is only available if bought from a car dealer. Different warranty laws apply in different states, essentially you are covered for the car and all fittings present at the time of sale.

As well as choosing the right car for your purposes you should consider the other costs such as: registration, insurance, stamp duty and the transfer fee. Additional ongoing costs include fuel and maintenance.

Set the maximum limit on your budget and be strict with it. Enquire about car loans available, look at their interest rates and repayment terms. If you have any savings use that money for an upfront payment as this will reduce your loan repayments.

Many car yards offer car loans as well, however, you should shop around for the best financial deal. The easiest way to search for a loan is to use the Internet. It is not advisable to apply for a loan until you get confirmation from a broker that the actual loan application will be approved if you proceed with it.

Each time a loan application is declined it will appear on your credit file report, and it will negatively impact your next loan application. Having small, paid defaults on your credit file should not prevent you from obtaining a car loan, however, the financial institution may slightly increase the interest rate for the loan. If your defaults are unpaid your chances for loan approval will be greatly reduced and the major banks will certainly refuse your loan application.

Don't forget that you can always negotiate the purchase price of the car, even if you manage to reduce the purchase price by 5 or 10 percent this will reduce your loan repayments accordingly.

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