Vehicle finance is easier to compare when you look beyond the monthly instalment. The purchase price, deposit, interest rate, term, fees and any balloon or residual payment work together to determine what the agreement may cost.

The main parts of a finance quote

  • Deposit: money paid upfront, which reduces the amount financed.
  • Term: the number of months over which the agreement is repaid.
  • Interest rate: the rate applied under the lender’s approved offer.
  • Fees and charges: ask which once-off and monthly charges apply.
  • Balloon or residual: a final amount left for the end of the agreement.

Why a lower instalment can cost more overall

A longer term can reduce the monthly instalment while increasing the period over which interest and fees are paid. A balloon payment can also lower the monthly amount, but it leaves a lump sum to settle, refinance or cover through another approved arrangement at the end.

Ask for the pre-agreement statement and quotation, and compare the total cost of credit as well as the monthly amount. National Credit Regulator material emphasises disclosure of the total cost of credit and affordability assessment.

Set an ownership budget, not only a repayment budget

Leave room for insurance, fuel, licensing, servicing, tyres and unexpected repairs. A lender’s affordability outcome is not the same as your personal comfort level, so choose a repayment that leaves a sensible buffer.

Prepare before you apply

Requirements vary by applicant and lender. Ask which identity, income, address and banking documents are currently required, and make sure the information is complete and accurate. Avoid sending financial documents through unverified channels.

Questions to ask before signing

  • What is the interest rate and is it fixed or variable?
  • What are the once-off and monthly fees?
  • What is the total cost shown in the quotation?
  • Is there a balloon payment, and what happens when it becomes due?
  • Can extra payments be made, and how are they allocated?
  • Which insurance or optional products are included?

This article is general information, not financial advice or a finance offer. Approval, rates, terms and document requirements depend on the lender and applicant. Learn about vehicle-finance assistance at Elso Cars or browse current vehicles.