Tips and traps to know before financing your next vehicle.

A loan is a commitment that shouldn’t be taken lightly. So before you make any decisions, have a read of these caveats that are commonly overlooked.

1. Read the small print to find out exact interest rates and fees: Most loan contracts have other fees in the small print, which come into play in irregular circumstances. These include initial set-up costs, known as loan establishment fees, charges for defaulting on payments and penalties for paying off the loan early, called break fees.
2. Check on the repayment frequency: Many Kiwi car loans have fixed monthly or weekly payment schedules. If you think you may want the freedom to make extra payments, be sure to check the terms of your agreement.
   
3. Don’t forget about any added costs: Cars also need insurance, a WOF and registration, petrol, diesel or electricity, servicing, and sometimes unexpected repairs. All of these are added to the cost of the actual vehicle, so make sure you understand the total cost of car ownership before you go shopping.
   
4. Car insurance is important protection: If you have a secured car loan, motor vehicle insurance (MVI) is compulsory. Regardless, protecting yourself and your vehicle with car insurance is the best way to avoid a hefty bill in the unfortunate event of an accident. MVI covers fire, theft and collisions whether it’s your fault or not. In addition, depending on the level of insurance you sign up for, you may also be covered for windscreen repairs, transport, accommodation, and towing costs.
5. Mechanical breakdown insurance (MBI), also known as a mechanical warranty, is different from MVI but can be just as valuable: Within reason, MBI covers the repair or replacement of mechanical and electrical parts that break down during everyday use. Unlike MVI, the faults don’t have to be caused by accident to make a claim. Policies are available for 12, 24, and 36 months and come with AA’s roadside assistance.

With these tips and traps up your sleeves, you’ll be prepared for when you’re ready to think about finance options for your new whip. See what you could get through our online car loan application. It’s free to apply, and you’ll have your answer in 60 seconds. Our experts are on hand to help you if needed or offer you financial advice.

This blog is provided for general information purposes and is not a recommendation you enter into or exit any particular loans or insurance policies. Information on the blog does not take into account your particular circumstances, including your objectives, financial situation or needs. We recommend you seek advice from a financial adviser before taking any action as appropriate. The Lending People Limited (FSP240365) is a licensed financial advice provider and can provide advice on some types of personal loans, insurance. Find out more about The Lending People and how we may be able to help you.