Choosing the right car loan

So you’ve looked around and found the perfect car – your vehicle soul mate. You’re all ready to buy, but your savings account isn’t as healthy as you’d like it to be, and you haven’t recently won the lottery. Loans can be difficult to get your head around at first, so we’ve tried to make it a little easier for you.

How much?

When considering how much you’ll need to borrow, it’s important you think about what your car will actually cost you. Aside from your loan repayments, you’ll need to budget for:

  • fuel
  • servicing
  • insurance

Add onto this your other living expenses like rent, food, entertainment and bills, and you’ll have a much clearer idea of what you can afford to pay each week on your loan. Websites like moneysmart.gov.au have some fantastic budgeting tools to make this process much easier for you.

Remember that your expenses and circumstances will change throughout the term of the loan, so it’s best to keep a little in reserve for things you may need or want to buy in the future.

Secured or unsecured?

Credit providers will offer both secured and unsecured loans. The two do differ and it is important that you know the difference.

Secured  Unsecured
  • The loan is secured by an asset such as the car itself, which can be repossessed if the loan goes unpaid 
  • Will generally have a lower interest rate
  • Higher chance of approval
  • No security assets or valuable items required to secure the loan 
  • Will generally have a higher interest rate
  • Lower chance of approval

Fixed or variable?

A fixed interest rate loan is where the interest rate does not change for the period of the loan. This means your regular repayments will stay the same for the entirety of the loan.

A variable interest rate loan means the interest rate may change throughout the period of the loan. This means it may drop, and your repayments will become cheaper. However, it also means that it could rise, and therefore your repayments could become more expensive.

Always be careful! The lowest interest rate may not necessarily mean the lowest repayment. Always check to see if the loan has hidden or additional charges, making your loan more expensive.

What do I need?

In addition to making sure that you are over 18 years of age, credit providers legally have to ensure you aren’t borrowing more than you can afford. To help them with this, they’ll generally ask for the following information:

  • if you have a job and how long you have been employed
  • how much you earn
  • terms of your employment (eg casual, full time)
  • other living expenses (eg rent, mobile phone plan, groceries)
  • if you have other debt (credit cards or other loans). If yes, what for and how much is owing?

They will also take into account the following factors for a loan application:

  • whether you have paid other loans on time
  • valuable possessions, such as a car, that you own (if applying for a secured loan)
  • if you have any savings history
  • how much you will be initially depositing onto the loan.
  • To help them know if you have had any problems paying previous loans, credit providers will refer to your credit report.

Choosing the right car insurance

Insurance is there to protect you when something goes wrong so make sure you have the right level of protection before you get behind the wheel.

Getting it right

Insurance can be difficult to get your head around, so here are a few terms you should be familiar with before you get started:

Premium

An insurance premium is the annual price that you pay for your motor vehicle insurance policy. A premium is usually calculated on the following factors*:

  • the year, make, model and type of your car
  • the sum insured or agreed value
  • your age
  • your insurance and driving history
  • the suburb where your car will be garaged.
  • *Some insurers have even more underwriting considerations.

Excess

Most car insurance policies need you to pay an excess in the event of an accident or theft. An excess is the amount of money you have to pay towards the cost of a claim. The insurance company will cover the difference if your claim is accepted and in most cases, if you are not at fault you will not have to pay the excess at all.

Age Excess

An age excess applies to younger drivers. This means if you’re under a certain age, usually 25, you will need to pay a higher excess amount.

Compulsory Third Party (CTP) Insurance

This is the only type of insurance that is compulsory. You need to pay it every year along with your car registration.

CTP Insurance protects you against legal liability due to injury to another person, no matter who is driving your car at the time. It covers bodily injury only, not other people’s property. If you are the 'at-fault' driver, you will not be covered for your injuries under the CTP insurance cover. If you want cover for when you are injured as an ‘at fault’ driver, ensure you select a policy where the insurer provides that extra cover.

You can select your CTP insurer when your car registration is due for renewal or you can nominate to change your CTP insurer to RACQ Insurance from your next registration renewal at any time. RACQ CTP cover includes At Fault Driver Injury Insurance at no extra cost for added peace of mind.

Find the right option for you and your car

RACQ car insurance can help you protect your car and help you get back on the road sooner. We have three car insurance options:

Comprehensive Motor Vehicle Insurance

Covers you:

  • if your car is damaged or stolen
  • for accidental damage to another person’s car, property, or bodily injury (up to $20,000,000)
  • for a number of additional and optional benefits at no extra cost.

Motor Fire, Theft and Third Party Liability Insurance

Covers you:

  • if your car is stolen or accidentally damaged by fire
  • for accidental damage to other people’s car, property, or bodily injury (up to $20,000,000).

Motor Third Party Liability Insurance

Covers you:

  • for accidental damage to other people’s car, property, or bodily injury (up to $20,000,000). 
  • Third Party Liability Insurance is different to the CTP Insurance you get when you register a car.
  • Visit RACQ Car Insurance for more information about car insurance policy options.

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*12 months free Roadside available to 17 year olds. **2 years half-price Roadside Assistance available to 18 & 19 year olds. To join Free2Go, you must be living in Queensland and be 16-19 years old. Banking and loan products issued by Members Banking Group Limited ABN 83 087 651 054 AFSL/Australian credit licence 241195 trading as RACQ Bank. Terms, conditions, fees, charges and lending policies apply. This information does not take your personal objectives, circumstances or needs into account. Read the disclosure documents for your selected product or service, including the Financial Services Guide and the Terms and Conditions, before deciding.

Limits, exclusions & conditions apply. RACQ Operations Pty Ltd (ABN 80 009 663 414, AR 234978) is an authorised representative of Tokio Marine & Nichido Fire Insurance Co., Ltd (Tokio Marine & Nichido) ABN 80 000 438 291 AFSL 246548, the insurer underwriting this product. This is general advice only. We do not provide any advice based on any consideration to your objectives, financial situation or needs. Please review your own needs and the combined Product Disclosure Statement and Financial Services Guide before deciding to buy this insurance.

^Basic Excess Waiver Offer commences 18 July 2018 and may be withdrawn at any time without notice. Any incident that occurs before the withdrawal date will be eligible for the Offer. The offer is available to any RACQ Comprehensive Motor Vehicle Insurance Policyholder. The Learner Driver must be a valid Free2Go member with RACQ at the time of any incident. The Offer applies specifically to the "Basic" excess that would otherwise be payable under the RACQ Comprehensive Motor Vehicle policy. Other valid excess amounts may be payable. Insurance products issued by RACQ Insurance Limited ABN 50 009 704 152. Conditions, limits and exclusions apply. This is general advice only and may not be right for you. This information does not take your personal objectives, circumstances or needs into account. Read the PDS and SPDS (where applicable) before making a purchase decision. Contact 13 1905 for a copy. Click here for full terms and conditions.

Except for RACQ Bank, any RACQ entity referred to on this page is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). That entity’s obligations do not represent deposits or other liabilities of RACQ Bank. RACQ Bank does not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.