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What's the best way to do that? A car is a depreciating asset and ideally should be funded by cash, not borrowings. But assuming you can't wait to save enough and want a dedicated loan for your car - rather than leasing or drawing down on your home loan - there are plenty of products to choose from.
A recent Cannex survey of personal loans examined 520 loans, 336 of which were car loans and 184 secured or unsecured personal loans.
The costs differed dramatically, both in terms of the fees charged and the interest rate.
Am I better off using a car loan or a personal loan? Michael Moran, a Cannex financial analyst, says you'll get a better interest rate if your loan is secured. Car loans are specifically set up to accept your car as security and many personal loans will do this as well. Both have competitive interest rates.
Your other option is an unsecured loan but you'll generally pay a couple of extra percentage points in interest.
What sort of interest rates are we talking about? There's a wide range. Cannex says the banks have personal loan variable rates of 10.6 to 15.2 per cent, with a similar range in fixed rates.
Credit union rates are even more diverse with a range of 7.99 to 19.24 per cent for variable loans and 8.75 to 15.5 per cent for fixed rate loans.
Cannex found there wasn't a lot of difference between new and used car loans - though rates for used car loans were slightly higher on average and the most expensive rate was 15.24 per cent compared with a maximum rate of 13.25 per cent on the new car products.
Why such a range? Moran says many lenders have tiered interest rates. Instead of just quoting a set rate they quote a range and your interest rate will depend on how risky the lender reckons your loan is.
Factors such as putting up a decent deposit and using the car as security can bring the loan rate down.
What other costs are involved? Glad you asked. Fees on these loans are a potential minefield and not always easy to justify. Application or establishment fees can be up to $250 - pretty hefty when you consider home loan fees are typically about $600 for much higher loan amounts.
Source:
http://www.smh.com.au/news/investment/drive-a-bargain/2007/07/02/1183351123691.html | 
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