How does vehicle financing work in New Zealand?

Consider your options

First, you need to decide if a car loan is right for you. Can you afford to buy a car outright instead of taking a loan? For many, the answer is no – in this case, do you have a steady income that can be used to make regular loan repayments over a period of 1-5 years?
It’s important to realize that while auto financing can help you buy a car out of your price range, it’s also a liability and expense that you’ll have to manage for years to come. Doing a few things beforehand can help you decide if this is right for you.

Determine how much you need

If you’re new to cars, it’s a good idea to outline your finances – otherwise you might fall in love with a car you can’t afford. Your regular income and expenses play an important role in determining the price of your car.


Research and compare lenders

When you’re looking for a car loan (especially if you’re in a hurry), it might be easy to send an application to various lenders who “don’t look dodgy” in hopes of getting something. However, applying for multiple loans in a short period of time can adversely affect your credit score, so be careful.
Instead, research your options before applying. Compare rates and fees – some lenders may have lower rates but charge exorbitant fees for setting up, prepaying, refinancing or terminating the vehicle.

Another thing to consider is whether you are buying privately or through a dealer. Buying a vehicle through a dealer is a bit more expensive, but is generally safer than buying privately because you can return the vehicle if it is defective.
If you are buying through a reseller, keep in mind that they may have a preferred financing partner, and applying through a reseller means the reseller can help you through the process locally. However, be sure to research and compare rates, reputations and fees of financial partners to make sure you choose the right lender for you.

Application for approval

If you find a car from a dealership and your preferred financing partner seems like a good fit, the process is simple – they can help you apply for a car loan on the spot.

If you don’t already have a car or are interested in applying directly to a financing provider, many lenders today allow you to apply for pre-approval online. Keep in mind that for many lenders, pre-approval is not the same as full loan approval.


Learn about insurance

Found a car you like? The next step is to look at the cost of insurance, as this affects how much you can afford (depending on the cost of insurance on the car). Most lenders will require you to have comprehensive insurance for your car, so this is an important question to know before buying.

Now is also a good time to consider purchasing other insurance products, such as: B. Machine breakdown coverage, residual debt coverage, or guaranteed asset protection. It’s definitely worth asking your dealer or lender about the prices and benefits of these products to see if they fit your needs and budget.


Sort documents

So you’ve found the vehicle of your dreams – if you haven’t applied for full registration, now is the time to do so. If you have previously received pre-approval for a loan, you may also need to provide supporting documentation to the lender so they can convert it to unconditional approval.

One of the things your financial services provider will need to verify is your identity, which can be done by scanning a certified copy of your driver’s license or by facial recognition. This type of biometrics can help speed up the process by cutting back and forth, so check to see if your lender offers it.


Sign in and drive!

Once you’re happy with the contract, it’s time to sign and start driving! Some lenders offer an online signature feature, which means you don’t have to print, sign and scan your paperwork – it can also save you a lot of time. If you haven’t already done so, you should purchase comprehensive insurance as soon as you buy your car. That way, from the moment you chase it away, you’re protected.

Your financing provider will tell you how much and how often you need to repay the loan. You can set it up to pay automatically or be debited directly from your account.

There are many different paths people can take when buying a car, depending on whether you buy it privately, through a dealership, find the car first, or get pre-approved.