5 strategies to avoid car loan pitfalls

Last updated on November 25th, 2021
  Written by 
Bill Tsouvalas
Bill Tsouvalas is the managing director and a key company spokesperson at Savvy. As a personal finance expert, he often shares his insights on a range of topics, being featured on leading news outlets including News Corp publications such as the Daily Telegraph and Herald Sun, Fairfax Media publications such as the Australian Financial Review, the Seven Network and more. Bill has over 15 years of experience working in the finance industry and founded Savvy in 2010 with a vision to provide affordable and accessible finance options to all Australians. He has built Savvy from a small asset finance brokerage into a financial comparison website which now attracts close to 2 million Aussies per year and was included in the BRW’s Fast 100 in 2015 as one of the fastest-growing companies in the country. He’s passionate about helping Australians make financially savvy decisions and reviews content across the brand to ensure its accuracy. You can follow Bill on LinkedIn.
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you could have gotten for cheaper. Shop around, look at what the prices are for the vehicle you want, how much the features cost, what’s the interest rate on car loans, etc. Holding this knowledge puts you at an advantage and shields you from lenders or dealers who would otherwise take advantage of you.

Be aware of your credit score and the options you have

You should know that your credit score is vastly important because it is what lenders base your interest rate on. In addition, a low credit score can also severely limit your choice of cars, for example. You have to be aware of your credit score and informed about what your options are. It’s true that a bad credit score makes things more difficult, but a lot of people make the mistake of not doing research on their available choices. That’s why they fall for lies about obligatory sky-high interest rates and fees. 

Know what you want and know it well

Before you go out shopping, take the time to sit down and make a list of features you are interested in. What do you actually want in a car? Is it a priority or something silly? Be ready to cut back on demands if you want to stick to a budget. Prioritise the necessary features over the vanity features and you have a better chance of ending up with a good vehicle in a decent price range. It’s important that you factor in the long-term maintenance costs attached to the car as well.

Don’t sign anything before you read it and understand it

This should go without saying, but you would be surprised at how many people sign contracts without reading them thoroughly first. Thus, please take your sweet time to read everything and don’t shy away from asking questions about points that are unclear, particularly when it comes to extra costs. Its important that you read all the clauses included in the contract most carefully. As a matter of fact, if you need to, take some extra time to reconsider your choice; the car isn’t going anywhere, no matter what the salesperson tells you.

Don’t offer a trade in

You might assume that trading in your used vehicle to the dealership will help you to obtain a sizeable discount on the price of the car you wish to purchase. However, studies show that this is actually a popular misconception. Thus, the smarter thing for you to do is to sell your used vehicle to a private buyer, instead of selling it to the dealership. Your gain will certainly be higher.

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This guide provides general information and does not consider your individual needs, finances or objectives. We do not make any recommendation or suggestion about which product is best for you based on your specific situation and we do not compare all companies in the market, or all products offered by all companies. It’s always important to consider whether professional financial, legal or taxation advice is appropriate for you before choosing or purchasing a financial product.

The content on our website is produced by experts in the field of finance and reviewed as part of our editorial guidelines. We endeavour to keep all information across our site updated with accurate information.

Approval for car loans is always subject to our lender’s terms, conditions and qualification criteria. Lenders will undertake a credit check in line with responsible lending obligations to help determine whether you’re in a position to take on the loan you’re applying for.

The interest rate, comparison rate, fees and monthly repayments will depend on factors specific to your profile, such as your financial situation, as well others, such as the loan’s size and your chosen repayment term. Costs such as broker fees, redraw fees or early repayment fees, and cost savings such as fee waivers, aren’t included in the comparison rate but may influence the cost of the loan. Different terms, fees or other loan amounts may result in a different comparison rate.

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