Car finance in NZ: compare the written offer before the weekly repayment

Once you have found a car you like, a small weekly repayment can make the purchase feel settled. Before agreeing, separate the price of the car from the structure of the finance.

That gives you two decisions to check: whether this car suits your needs and budget, and whether the loan is the best fit among the offers actually available to you.

Settle the purchase figures first

Write down the car’s cash price, your contribution and the amount you need to finance. Keep the price of any trade-in separate so you can see how the figures fit together.

If you compare finance for different cars, acknowledge the different purchase prices and ownership costs. If you compare lenders for one car, give each the same price, deposit and target term.

Ask what is included in the financed balance. Delivery, optional warranties or other products can change the amount borrowed. Decide whether you want each item, rather than treating the bundled figure as fixed.

Ask for a complete written comparison

For each offer, record the repayment frequency, number of payments, interest rate, all fees, total payable and any final or balloon payment. Note which costs are paid separately.

Consumer Protection’s vehicle-finance guide explains the disclosure and contract information borrowers should receive. Use those documents to check what is being offered before signing.

If a number is missing, ask for it. A repayment advertisement is not enough to tell you how much the whole arrangement will cost.

Watch for the payment waiting at the end

A smaller regular payment can be useful, but check whether a large amount remains due at the end of the term. If so, ask how you would pay it without assuming you can sell the car for a particular amount or obtain another loan.

Here is a fictional illustration, not a finance quote. One arrangement requires 156 weekly payments of $90 and no final payment: scheduled repayments total $14,040. Another requires 156 weekly payments of $70 plus a $4,000 final payment: scheduled payments total $14,920.

The second weekly figure is lower, but its payments add up to $880 more. Any separately paid fees must also be included, and both offers need the same vehicle and borrowing assumptions for a useful comparison.

Understand security and insurance

Check whether the car or another asset will secure the loan. Ask what that means for selling the vehicle, changing insurance or missing repayments. These are important conditions even if the quoted rate is attractive.

Confirm the insurance required by the lender, obtain a quote, and include it in your budget. Do not assume that the loan repayment is the only regular cost you are adding.

Nectar’s car loan information describes secured and unsecured options, including its vehicle-security process. If you consider a secured option, confirm the current vehicle, insurance and timing conditions in your own written offer. Meeting vehicle criteria does not guarantee loan approval.

Leave room for owning the car

Budget for fuel or charging, insurance, servicing, tyres, WoF and licensing, plus likely repairs. A used car with a smaller purchase price can still need immediate maintenance.

Before committing, obtain an appropriate independent inspection and check the vehicle’s history and any money owing. If a repair is identified, decide whether the price and your available funds still make sense.

It can help to compare two weekly budgets: your present transport costs and the likely costs after buying. Include costs that disappear as well as those that increase, using figures you can support.

Choose the offer you can explain

Before signing, you should be able to say how much you are borrowing, how much you will pay overall, when the final payment falls, what is security and what happens if you repay early.

If you are still choosing between offers, ask each lender to explain the same unresolved questions. Avoid declaring a lender cheapest because of an advertised starting rate; the relevant comparison is between the written terms offered to you.

A car needs to work for your everyday life. The finance should leave you able to run, maintain and insure it as well as make the repayment.