Understanding the Car Loan Process in NZ: 5 Steps to Know

If this is your first time financing a new car, understanding the car loan process can equip you for success and help you find the best deal. Auto financing is a common type of personal loan in NZ, which makes buying a new car more accessible through scheduled payments.

Whether you need car or bike finance, read on to learn the process in five easy steps and brush up on common mistakes to avoid.

What Do I Need to Apply for a Car Loan?

Before you apply for a vehicle loan, double-check that you have all the documents you need and that they are up to date. Expired IDs or old documents may be rejected or disrupt the loan process if they don’t reflect your current circumstances. Key documents you’ll need to start the process are:

• Valid driver’s license
• Proof of income
• Proof of address

The Car Loan Process Explained Step-by-Step

Now that your documents are ready, it’s time to start your vehicle loan journey. Securing car finance in NZ is straightforward and doesn’t have to be stressful to navigate. The following steps break down the process, so you know what to expect at each stage of applying for your dream car.

1. Assess Your Finances

This is an important preliminary step that will set you up for success. Start by evaluating your finances and credit score to create a realistic budget. While it might be tempting to stretch your finances to the limit, think about how the loan will affect your other expenses during the repayment period. A new car is an exciting lifestyle upgrade, but it should be one you can enjoy without added financial stress.

2. Research Your Lender Options

There are plenty of ways to secure car financing in New Zealand. We recommend thoroughly exploring your options and not rushing into the first viable or attractive option. The most common options are:

• Car dealerships: Many dealerships offer in-house financing options, making it convenient to handle both the financing and purchase of your car in one place. However, these loans often come with higher interest rates compared to other avenues.
• Bank loans: One of the more traditional routes for securing a car loan is through your bank. They can provide competitive interest rates based on your credit history but could have a higher ceiling for borrowing with stricter requirements.
• Online finance brokers: Loans are no longer limited to pen and paper or in-person meetings. Online brokers can handle the car loan process for you from start to finish. They can also find the most competitive rates and handle the research for you.

Look for the best deal by exploring different lender options and have questions ready before contacting them. Common questions to ask include whether they offer insurance with the loan and what their credit requirements are.

3. Secure Pre-Approval for Your Car Loan

By this stage, you likely have an estimate of your budget. The next step is locking in pre-approval to establish a concrete spending limit and strengthen your position. For lenders such as car dealerships, you usually provide your finances and go through a credit check. Depending on your lender of choice, you can apply for pre-approval online.

Some online finance companies in NZ, like Rostron Finance, have convenient tools to arrange pre-approval on their website. Loan calculators allow you to input your finances and generate an instant finance pre-approval without impacting your credit score. If this quote suits your circumstances, you can apply with reputable lenders through their network. With your finances ready, this is a convenient option that can take minutes to complete with fewer person-to-person touchpoints.

4. Organise Your Car and Insurance

After you’ve secured pre-approval, it’s the perfect time to start looking for a car, if you haven’t already. Although looking for cars at the upper limit of your pre-approval amount is tempting, we suggest having several options across your budget.

Once you’ve settled on a car, it’s worth checking the available insurance options. Many lenders require insurance; some will offer it as part of the car loan process. Some options include comprehensive insurance, shortfall gap cover, or extended warranties. Chat with your lender or broker about insurance and what will suit your needs the best.

5. Review, Sign, and Drive

By now, you will have a contract ready to review and sign. Take the time to carefully read through the terms and conditions, and don’t hesitate to ask your lender for clarification on anything you find unclear or need further explanation.

Some lenders have a paperless car loan process, saving you from printing, signing, and scanning your contract and documentation. Whichever path you’ve taken to get your car loan, doing one last check of your finances and the car you’ve chosen is worth doing before signing up for this commitment.

Common Mistakes to Avoid According to Financial Advisers

Some of the common mistakes people make when applying for car loans include:

• Settling for the first option with a dealership
• Not considering finance brokers
• Going directly to a dealer
• Not shopping around
• Agreeing to interest rates that aren’t financially sustainable

For an Easy, Paperless Car Loan Process, Talk to Rostron Finance

With proper preparation, navigating the car loan process step by step can be straightforward. However, the abundance of options can feel overwhelming when trying to find the best deal for your budget and needs. A trusted online finance broker can simplify this process, offering tailored options and streamlining the experience with a paperless approach.

 Your dream car is just a few clicks away with Rostron Finance. Our streamlined, paperless process is designed for your convenience. We also have registered financial advisers who can help you make the best decision based on your financial goals in the future. Get in touch today for any questions about car finance, or start your application if you’re ready.