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5 things you should do if you're planning to get a car loan in 2016

Photo: David McNew/Getty Images.

Australians bought a record number of cars last year, more than 1.1 million vehicles all up. SUVs retained its place as the most popular category, although the Toyota Corolla hatchback was the most popular car.

Toyota also took the crown as the best selling brand, moving more than 200,000 vehicles alone. But it was the luxury car makers that reaped the most benefit from the boom, with Porsche doubling its sales, Audi increasingly by 20%, and Lexus up 24%.

The positive trend looks set to continue in 2016, with SUVs again leading the way. But 2016 will also see the introduction of many new brands to Australia, led by several Chinese companies like Haval.

To help you navigate the car market in 2016, we’ve spoken to Bill Tsouvalas, from www.savvy.com.au, recognised by BRW as one of the fastest growing car finance companies in Australia in 2015 and have come up with 5 things to do if you are planning to buy a car.

1. Research vehicles to suit your needs

Before borrowing a cent more than you have to, make sure the car you’re buying is right for your needs. If all you do is run down to the shops, you may not need a car that can take on the Sahara.

On top of car models and optional extras that may not make sense for your lifestyle – do you need seat-warmers if you live in the tropics? Take into account the big differences in ongoing costs.

Bigger cars often burn through more petrol than smaller cars. Some models and brands are more costly to insure than others. The cost of replacement parts and regular maintenance can vary for a number of reasons.

2. Use a car broker

Once you know what car you want, it might be wise to enlist a car broker instead of the traditional way of sourcing a vehicle. A car broker can tap into a national network of car deals to find the vehicle you are looking for, often for less than you would pay at your local dealer.

Using a car broker offers you a much wider selection, allowing you to get the exact car you need, with the added protection of sourcing from a dealer. You need never step foot in a dealership.

3. Compare lenders

Just as not every car was created equal, some lenders are better for your bottom line than others. Don’t settle for the most convenient lender – often the car dealer, as it pays to shop around and consider the kind of loan you are taking.

Lenders differ in the kinds of loans they offer – secured or unsecured, fixed or variable interest rates. Some may not be setup for the kind of loan you are seeking, so might charge higher rates and fees.

Important things to check about your prospective lender are that it is licensed with ASIC, the fees they charge and the term of the loan. With the internet it has never been easier to compare lenders.

Remember to always read the loan contract.

4. Check the interest rate and credit rating

Interest rates depend largely on your credit history, so before you apply for a loan check your credit report. Make sure the loans and debts listed on your report are correct, and any black marks are justified. If not, ask for them to be fixed.

Once your credit report is sorted, pay attention to the interest rate you are being charged. One positive of a car loan is that the vehicle acts as security, so interest rates are generally lower than a personal loan.

5. Pick suitable insurance add-ons

Once you have your car, make sure its adequately protected, but not overprotected.

Car insurance can vary greatly – comprehensive insurance covers damage to both your and other peoples’ property, but there can be huge differences in the excess.

Some insurance also offers extended warranty, roadside assistance, gap cover and loan protection as extras. These aren’t always necessary or quality, so shop around and make sure you only pay for what you need.

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