When looking for a car, you have a couple of options you may consider. How powerful is the engine, how much bass does the stereo have, and what additional features does it have? When you have kids, this list of requirements grows to ensure safety, reliability and practicality, like space for prams, backpacks and groceries for your little ones.
It can be hard to know where to begin when deciding on purchasing a car, either outright or on a loan, while also considering your financial situation, your mortgage repayments and school fees. Here we will share what you should know before getting a car loan when you have kids, and how you can find a car that works well for both your lifestyle and bank account.
Assessing Your Family’s Vehicle Needs
While you might have a favourite car brand like a Mercedes, Mazda, Toyota or Tesla, your choice of car needs to be about more than just its good name and reputation, especially when you have children.
You’ll need to think carefully about aspects like how many seats you’ll use every day, whether the boot can handle your daily load, and how easy it is to get kids and car seats in and out.
Of course, safety should also be front of mind, which is why you should find a vehicle that possesses a strong crash rating, child lock systems, and plenty of airbags. You might also appreciate features like rear air vents, cup holders, and easy-clean fabric, which can be especially important when accommodating little ones.
Understanding Car Loan Types & Terms
Once you have found a car that fits the bill, you will need to work out how to pay for it. If you are lucky enough to have enough money at your disposal to purchase it outright, then you might be able to secure a discounted price. If you don’t, then you will need to procure yourself a loan.
Unfortunately, not all car loans are the same, and in fact, the type of loan you choose can make a big difference in your monthly expenditure.
A secured car loan generally comes with a lower interest rate, but it means your car is used as collateral, so if you default, the lender can repossess it. On the other hand, an unsecured loan might be easier to get if the car is older, but the caveat is that it comes with higher interest.
You’ll also want to consider whether you prefer fixed or variable interest rates, and if you’re comfortable with balloon payments at the end of the term. This can leave you owing a large chunk all at once.
Whichever loan type you choose, it is important to understand the pros and cons of each type before signing on the dotted line.
Check Your Credit Score
One of the main factors against which your suitability for any type of loan is assessed is your credit score. This is important because it impacts what kind of interest rate you’ll be offered. You can find out more about how to access a credit report here.
The good thing about a credit report is that even if your finances haven’t been perfect, you can take steps to tidy things up. Some of the ways you can boost your score include paying bills on time, reducing existing debts, and avoiding unnecessary credit applications.
If you’re applying as a couple, consider whose credit file is stronger. You might get a better deal applying together or with just one person listed, depending on your situation.
Bad Credit Car Loans
If your credit rating isn’t quite where you’d like it to be, possibly because you’ve experienced a bit of financial stress, then you might think that a car loan is not attainable. However, there may be options available to you.
Bad credit car loans are specifically designed to support Australians who’ve faced a few financial bumps and may offer you a pathway to getting finance even if you’ve had credit issues in the past.
It’s worth exploring options like Azora’s bad credit car loans early on so you know where you stand before heading to dealerships.
Budgeting for a Car Loan with a Family in Mind
A car loan might seem affordable at first glance, but it’s important to view it in the context of your entire family budget.
When you’ve got kids, your expenses can change rapidly, given that you may have to pay for daycare fees, sports activities, unexpected doctor visits, and a myriad of other costs. All of these need to be taken into account before locking in a repayment plan.
It’s also essential to factor in the ongoing costs of owning a vehicle, such as petrol, rego, insurance, and keeping it roadworthy. Before signing anything, it’s smart to use a car loan calculator to map out what different loan amounts and terms could look like for your actual income and expenses.
Think Ahead: Plan For The Future
In the blink of an eye, your kids will grow up and what seems like a spacious SUV now could start feeling cramped once you’re carting around school bags, musical instruments, and six-foot-plus teenagers.
Before taking out a car loan, think about whether the vehicle will still meet your family’s needs in a few years. For instance, if you’re planning another baby, intend to move house, or change jobs, it could affect how you use the car.
It’s also worth considering the resale value, should you ever wish to sell it. Choosing a vehicle that holds its value well could help if you decide to trade up in the future.
With all these strategies in mind, think towards the future when planning your car purchase and assess your financial situation and future goals for you and your family.
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