Prep your finances for a new car this EOFY

The end of the financial year (EOFY) for car dealerships is like Boxing Day for retailers, which means if you're after a new car, now is a good time to get one - you could save yourself thousands.

However, that's not an invitation to go in blind: you'll still need to do your research around rates and make sure your finances are in order, whether you're buying outright or getting a loan.

Before you start shopping, let's take a look at how to prepare your finances for some new wheels this EOFY.

‍

Set yourself a budget

Like anything, the key to preparing yourself financially for a big purchase is to set yourself a budget, and stick to it. Think of it like attending an auction for a house: you know what you can afford, and you can only buy within your means.

If you're paying outright, then you likely already know how much you can afford to spend on a car. However, it's a good idea to remember that around 10-15% of a car's value is lost as soon as you drive it off the dealer's lot, so keep this in mind when choosing how much you want to spend.

If you're opting to get finance for your car, then you may want to work backwards from the cost of a car to the loan repayments. Make sure you keep interest in mind when working out your repayments.

But it's not just repayments you'll need to factor into your budget equation. You'll also need to do some research around the running costs, like:

• Fuel
• Maintenance
• Insurance
• Car registration, and
• Stamp duty.

And yes, you read that last one correctly. You will have to pay stamp duty whether you buy a new or used car. Each state and territory calculates stamp duty differently, so check out the different state government websites to make sure you know what you're about to fork out.

Insurance can vary depending on the size of the car, your age, your driving record and where you live. Use comparison sites to ensure you're getting the best deal.

‍

Shop around

Once you've sorted your budget out, and picked a few models within that budget, it's time to do some research.

A great way to make sure you get the best deal at the dealership is to research the price of the make and model you want across different dealerships. That way, you can get a sense for what the car is really worth - and what a good deal looks like.

If you do get set on a particular car at a particular dealership, the ball is in your court during EOFY. If you put some pressure on the dealer, they'll usually meet your request.

Another thing to keep in mind is often dealers can add extras to their base deal like warranties, tints, floor mats and other items. Again, the ball is in your court. If you want some of these extra, try to haggle with the dealer.

The bottom line is, don't be afraid to speak up if you're truly ready to buy. By the same token, if it doesn't feel right, don't settle. Leave your emotions at the big automatic doors, and always stick to your budget.
Consider your finance options
There are a few different options when it comes to car financing, the most common being personal loans, car loans, low doc loans and chattel mortgages.

Personal loans and car loans both allow you to borrow a lump sum and pay it back in regular instalments. Personal loans can be secured or unsecured. However, when you opt for a car loan, the car you're purchasing will be used as security. This means if you default on your repayments, the dealership can seize your car.

New car loans tend to have lower interest rates than used cars, and borrowing amounts can vary depending on your eligibility.

‍

Consider your finance options

There are a few different options when it comes to car financing, the most common being personal loans, car loans and chattel mortgages.

Personal loans and car loans both allow you to borrow a lump sum and pay it back in regular instalments. Personal loans can be secured or unsecured. However, when you opt for a car loan, the car you're purchasing will be used as security. This means if you default on your repayments, the dealership can seize your car.

New car loans tend to have lower interest rates than used cars, and borrowing amounts can vary depending on your eligibility.

‍

Check your credit score

If you're opting to apply for finance for your new car, make sure you check your credit score to ensure there are no surprises when you get to the bank.

Lenders will look at your credit score when you make an application for a loan, and sometimes a low credit score can result in a rejection of the application. With that being said, EOFY is generally a good time to apply for a loan if your credit score isn't so great. That's because lenders, like dealers, have targets to hit - credit targets. This means even though your credit score may not be flash, lenders may be lenient around this time.

But low or high score, knowledge is power. It's a good idea to keep an eye on your credit score, and check it every 3 to 6 months to stay on top of your financial pulse.

You can check your credit score here at SocietyOne. You'll even receive a credit score report with powerful insights, to see how banks and lenders view your score. Check it for free now!

‍

Going guarantor on a loan

Alternatively, if you don't think you have the funds or the credit score to get a loan under your own name, you can ask a family member or a friend to act as guarantor and increase your odds of approval.

However, it's important your guarantor understands their responsibilities. Essentially, it means they will be legally responsible for the entire loan - and any associated costs - should you default on the repayments.

The guarantor's borrowing capacity will also be tested, so make sure your friend or family member has a good credit history too.

‍