8 Things to Know About Auto Loans in New Zealand

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Written By Charlotte Miller

Buying a car is exciting and challenging, especially when it is going to be your one of the most expensive assets.

Many people have reached the point where they want to upgrade their old ride to a better, secure, or reliable vehicle but don’t have the savings to do it in one shot. In such situations, people usually purchase a car on finance. 

If you are a New Zealand resident, many car loan options are available. Studies show that more than 80% of cars are bought through auto loans. However, you may find it confusing and apprehensive if you don’t have prior experience with the process.

So, before applying for the process, research the best car loans and their terms and conditions carefully, just as you would when choosing a vehicle.

The following are five things to check and understand before signing a loan contract.

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Take the time to research 

Before applying for an auto loan, it is recommended to do proper research about the type, model, and color of a car you want. Which car suits your lifestyle? Will you be able to afford the petrol consumption and insurance of the vehicle? 

Moreover, this will help you to estimate the price range you need to finance. Sometimes, finding your perfect consider buying a second-hand car which seems feasible and affordable with a low cost of financing. 

Consider the options available

Taking a loan is not always a good idea for everyone. Have you considered the possibility of making your payment in one go? Probably for most people, it is not as feasible. In that case, look at your income. Is it stable enough to cover your payment for 1-5 years?

Having the option to finance your car can be a great way to help you get a vehicle that would otherwise be out of your price range. It’s important to do some research upfront to determine whether or not it’s the right choice for you.

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Calculate how much you will need

Getting your finances in order before looking at cars is a good idea. This will save you from falling in love with a vehicle you can’t afford. By determining your income and expenses, you can calculate the type of car you can easily finance.

Using a repayment calculator can give you a better idea of how much you can afford. Consider what you would spend on a car and calculate the monthly payments based on your income and expenses.

If you can afford all the financial burden, the next step is determining which finance provider is right for you.

Lender comparisons and research

As you search for a car loan—especially if you need to find one quickly—you might try to send applications to various lenders to get one that meets your needs. You should however be aware of the risk of negatively impacting your credit score if you apply for several loans within a short period.

Before you apply, research your options. Examine both interest rates and fees. A lender may charge a lower interest rate but want early repayment or a refinance fee.

Whether you buy privately or through a dealer is another factor to consider. While purchasing a vehicle through a dealer might be more expensive, it is usually more secure than buying it privately since you may be able to return it if it is defective.

If you plan on buying privately, a pre-purchase inspection is highly recommended, so you know exactly what you’re getting.

Another option is to obtain a loan from a car dealership. Dealers usually assist you with the application process for these loans since they’re backed by reputable third parties. But before reaching any conclusion, you should do proper research and compare the finance partner’s rates, reputation, and fees with others to ensure you are selecting the right lender.

Approval application

When you find a car at a dealership and the finance partner they recommend seems right for you, the process is simple, and they’ll assist you with your application.

It is also possible to apply directly to the lender if you don’t yet have a car in mind, as certain lenders will allow you to apply online for pre-approval.

Some loan providers offer online applications that can give you a decision within minutes, depending on the terms of your loan. This is a great option for busy people looking for a faster process that doesn’t require much interaction with personal lenders. Depending on the situation, you might be approved right away, and in other cases, you will only need to provide proof of income to be fully approved.

Take a look at the insurance

Once you have decided on a car to buy, you should find out how much insurance would cost, as this will affect the amount you can afford. The majority of lenders require comprehensive insurance on the car, so it is important for you to fully understand this expense before making a purchase.

During this time, you should also consider any other insurance products you might want to purchase, for example, mechanical breakdown coverage, debt protection coverage, or asset protection plans. Your dealer or lender can help you determine if these products fit your budget and needs by explaining their pricing and benefits.

Documentation should be sorted out

After getting pre-approved for a loan, the lender may require you to provide supporting documentation so that the loan can be converted into unconditional approval.

During the application process, your finance provider will need to confirm your identity, which can be done by scanning a certified copy of your driver’s license or facial recognition technology.

Upon approval, you’ll receive documentation within a short period, or it will be given to you on the spot if you apply through a dealership. You should carefully read the contract, including the terms and conditions, and ensure you fully understand what you are signing.


People can take many different paths when buying a car, whether they do it directly or with the help of a dealer, selecting a car first, or obtaining pre-approval first. 

Once have finalized the loan type, sign the contract and start driving! Some lenders offer online signing capabilities, eliminating the need to print, sign, and scan documents.

In case you haven’t already, you should arrange comprehensive vehicle insurance immediately after purchasing the vehicle. This will ensure that you’re covered from the first time you drive it.

The loan process can be different for everyone, but hopefully, the above guide will help you understand the factors to consider when applying for an auto loan.