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How Does Car Financing Work

Car Financing

If you have gone through books or references about buying cars, you know the language of car sales, as well as the ins and outs of doing negotiations with a car salesman. Let's say you've haggled for the best deal and finally settled to a price that works for you, is this a sign of relief? Well, not exactly.

If you finance a brand new car through dealership, the finance person's working on commission. Meaning, the deal you get is still up in the air, but they will not tell you this. The extended warranties, alarm systems, undercoating, etc. - these things that add on the last stages of the deal are often what the dealership makes money on. The finance office person's job is to up-sell you on these things after agreeing to a price with the salesman.

Tackled here are the choices available to you for car financing , the factor that determines the rate of interest you get, and how to know if you are really getting the greatest deal and other scams to lookout for.

If you are like everyone else, paying full in cash to purchase cars is not very possible. And even if it is, you might not want to finish up all your savings just to buy a new car. Meaning, you are either going to lease the car or perhaps buy it through financing. If you are going to buy one, you are probably going to finance it through dealership, online financial institute, credit union or bank, or maybe a relative.

Leasing can be good for some situations, but that is a whole other topic, so this will focus on the financing side. If you want to finance the car rather than paying cash, you need to do some homework and know how to get the best financing deal.

If you have the cash to pay for the car, and you're considering doing it this way, how would you know if it's the best thing to do? Here are some situations when paying cash is the best choice:

  1. Do it if you will be paying more interest if you finance the amount of money that you can earn if you invest or kept in the bank for savings.

  2. Do it if you don't carry a nice credit rating and would require paying higher interest rate to finance.

  3. Do it if you've got much debt but enough cash on hand, and if you do not want to put more damage to your credit rating.

The Process

The process of application is standard, with little variations, depending upon the lending institution you select.

  1. You'll need to fill out the application form. This involves providing information, including:

    - Personal Details
    - Monthly Income
    - Employment Details
    - Monthly Expenses

    The one lending you money will use this information to determine if you are eligible for car finance.

  2. The financier will be asking for copies of documents to reinforce the validity of the application. These normally include:

    - Valid Driver's License
    - Pay Slips
    - Proof of Billing / Residence

  3. After completing the process of application, and you were able to provide all the required documents, you will have to wait a couple of days while the application is being reviewed. If it goes well, a consultant will call you to confirm the application.


Aussie Loans is 100% Australian owned and we have been operating since March 2000. We currently have eight offices conveniently located in Queensland,New South Wales and Victoria. We are looking to expand Australia wide in the very near future.

Our experienced staff are committed to providing fast friendly service, helpful advice, flexible options and great deals.

We have direct links with over 20 major Australian Financial products which means we can tailor a loan facility that best suits your needs.

We are here for you and we wish to build a long lasting relationship with you. If it's a personal, used car finance , business loan, whether it's a Motorbike, Car or Boat you need, we are able to cater to your needs.