Residents of New Zealand bought over 95,000 brand-new passenger vehicles in 2015, according to trade group MTA, a striking but suitable total for a nation that ranks eighth worldwide in per-capita car ownership. The vast majority of these purchases involved some form of financing, with outright cash sales being by far the exception.
As New Zealand’s second most populous city, Wellington always ranks near the top itself when it comes to passenger vehicle purchases. Working with the right Wellington car financing provider can be an excellent way for residents and those elsewhere on the southern end of North Island to save money for years to come. Mastering a few simple concepts is typically all that it takes to figure out which car finance deal in Wellington will make the most sense for a given buyer, as well.
Breaking Down the Basic Car Financing Equation
When it comes to financing, would-be buyers will often focus mostly on the monthly payments they will be required to make, but car loan finance is actually a little more complicated than this. While knowing that a given monthly payment will be easy to accommodate within a certain budget, failing to account for the overall costs of a loan can prove to be expensive in the longer term.
Fortunately, this important total can be calculated easily enough, given these contributing figures:
Amount to be Financed: The final price of the vehicle to be purchased, on the day of the sale, as configured with options and any other extras.
Down Payment: The amount handed over in cash at the time of sale, typically varying from 10 to 20 percent. While “zero down” offers are sometimes available and can be tempting, they come with associated costs in terms of how long it will take to pay off a loan, how much interest will be paid, and an increased risk of loan principle exceeding the value of a vehicle as depreciation sets in.
Interest Rate: Of all the figures that buyers typically emphasise as they make their financing decisions, the interest rate charged on a loan likely ranks second behind monthly payments. This can be helpful in general, but, as with an excessive focus on monthly payment levels, the interest rates charged by different New Zealand finance companies should be viewed in the context of other important factors, like the overall cost of a loan.
Loan Term: Where financing terms used to typically top out at 36 months for passenger vehicles, many lenders in New Zealand today will extend loans that are to be paid off over 48, 60, or even 72 months. All else being equal, a longer loan term will result in lower monthly payments, and stretching things out can make sense in certain cases. On the other hand, paying off a loan over a longer period of time also means incurring a correspondingly larger tab in terms of accumulated interest charges.
Any One-Time Fees or Payments: Another way by which lenders sometimes seek to lower monthly commitments for borrowers is by including one-time payments, typically due at the very end of the loan term. These “balloon payments” can easily make a loan seem much more attractive than other options at a glance, but they can also produce problems for borrowers who prove unable to live up to that final commitment.
Taken together, all of these factors determine both the overall cost of a given vehicle loan NZ and the monthly payments that a borrower will be required to make. While it is possible to do the associated math by hand, it will typically be much easier to simply plug the figures into one of the widely available loan calculators online.
Judging the Trade-Offs
From that point forward, judging the attractiveness of any given loan offer becomes more personal. As with anything else, just about every choice will involve some trade-offs, and borrowers will always do well to think about how their personal situations might make certain of these more worthwhile than others. Some common considerations include:
Making a Larger Down Payment in Exchange for Lower Interest Rates: Lenders want borrowers to be invested in repaying their loans, and a larger down payment makes this more likely from the start. As a result, even borrowers with relatively weak credit histories can often lower overall loan costs and monthly payments by committing more money up front in the form of a larger down payment.
Tweaking Loan Terms to Reflect Other Goals: A shorter loan term at a particular interest rate will mean paying less for a vehicle in the end. A buyer who expects to keep a vehicle for a long time and who would benefit from access to a larger loan principle amount or lower monthly payments, on the other hand, might consider the increased costs worth the advantages they could confer.
Paying More on a Monthly Basis to Avoid Balloon Payments: Most experts advise against financing deals that include significant end-of-term payments, and the fact is that these arrangements can be dangerous for those who are unprepared. While some lenders will try to improve the attractiveness of their offers by including such terms, borrowers will often do well to prefer other options, even if that means paying more each month.
Work with the Right Lender from the Start
Oxford Finance is a leading Wellington car financing provider, with a simple application process and quick approvals making it easy for you to line up a pre-approved offer at www.oxfordfinance.co.nz/car-finance-nz. With higher approval rates than just about any other car financing company in Kapiti, Wellington, or elsewhere on the southern end of the North Island, we make it easy for you to get the best possible financing for your needs and situation. Stop by www.oxfordfinance.co.nz today to learn more and get started.