3 ways you can reduce the interest on your car loan
Aside from buying a house, car purchases are among the most expensive transactions most of us will ever make. Accordingly, it’s very common to take out a car loan in order to pay for that new set of wheels you’ve got your eye on. However, what a lot of people don’t consider is what they could be doing to make their car loan work for them in a better way – primarily by securing a better interest rate.
Over the repayment period, even a slightly lower rate can have a significant impact on how much interest you’ll have to pay your lender, so it’s certainly worth your while investigating the various ways to secure a better deal. To make this a bit easier for you, the team here at Beyond Bank has compiled three of the simplest ways to get a better interest rate.
Buy a new car
You might think that the best way to save money on a car purchase is to go for a cheaper, secondhand option. While this might save you in the short-term, you may be surprised to learn that newer cars often come with significantly lower interest rates than older ones.
One of the major reasons for this is that a newer car will hold its resale value far better than a secondhand one. Particularly with very old cars, resale value is often something of an unknown quantity, and lenders hedge their bets against the vehicle breaking down by increasing that amount of interest that you’ll need to pay.
The solution? Buy yourself a brand new car! Yes, you may have to save for slightly longer, or spend more time paying off your loan, but in the long run, thanks to a potentially lower interest rate, more of your money can be going towards the car itself. Besides, who doesn’t want an excuse to splurge?
Do your research
Another great way to save money with lower interest rates is simply to do a little bit of research. It can be tempting to simply go with the standard car loan offered by your car dealer, but often this won’t be the best deal you could get.
Spending a little bit of time looking at the options and comparing interest rates can save you hundreds or even thousands over the life of your loan, and that’s before looking into the special deals or discounts you may be eligible for from some providers. For example, here at Beyond Bank, we offer special discounts on interest rates and fees to our pinnacle +plus and life members.
Link to an offset account
One final way to potentially reduce the amount of interest that you’ll have to pay on your car loan is to link to an offset account. This is just like a normal bank account, with one major difference – balances held in the account up to $2,500 is treated as an offset against the amount that you owe. So, if you owe $10,000 and have $2,000 in your offset account, you’ll only be charged interest on the remaining $8,000. While this doesn’t reduce your actual interest rate, it does minimise the amount of money that you pay interest on, saving you money.
For an example of how this works in practice, check out the Beyond Bank Low Rate Car Loan Special Offer, which allows for flexible loan repayments and a low, fixed interest rate, in addition to an offset account. All of these different benefits mean that may pay less, and enjoy full ownership of your new car faster.
For more information on home loans, contact Beyond Bank today.