What you need to know about Car Finance when you arrive in Australia

Arriving in a new country has its many challenges and getting around Australia without a car can be quite difficult. Australia is a vast country with a lot of distance between its towns and cities. Although public transport is a good option in metropolitan areas it does become less reliable and much more infrequent in our lesser populated areas. To make the most of your time in our amazing country you will need a car or 4WD. The ability to access finance to purchase a vehicle is just another challenge facing new arrivals. The good news is that there are some lenders willing to offer car loans to temporary residents with varying visa allocations.

Visa and Residency Status

If you are new to Australia and looking for a car loan the first step is working out your residency status and visa requirements. A temporary resident visa lets skilled workers live and work in Australia, sometimes indefinitely. If you are in Australia on a work visa, then your finance term must end 3 months before your visa expires. For instance, you may have a 3-year work visa and apply for a car loan after 6 months of living here. The maximum loan term that you qualify for will be 27 months, that is 2 years and 3 months.

Student and training visas have had a temporarily relaxation on the number of hours that a student can work. The government introduced this relaxation to address workforce shortages. Now students can work greater than the stipulated 40 hours a fortnight in any employment sector. Students must ensure they continue to satisfy their visa conditions including maintaining their course enrolment, attendance, and course progress.

Visitor visas do not qualify for any type of lending. This includes those in Australia on a working holiday visa. Even though you have permission to work in Australia the maximum length of the visa is only 12 months.

Employment requirements for Car Finance

To obtain car finance you must have an income in Australia. If you are employed on a full-time or part-time basis and have a probationary period, then you must wait until your probation is completed. If you are working casually then you must work for the same employer for a minimum of 6 months before applying for a car loan.

Types of Car Finance

There are two main types of car loans for wage earners – a secured car loan and a personal car loan. If you do obtain an Australian Business Number and operate a business, then you can apply for business ABN car finance.

Secured Car Loan

A secured car loan uses the car as security against the loan. Lenders offer competitive interest rates on secured loans. The loan is taken over a fixed term and is repaid via regular fortnightly or monthly repayments. Most lenders do not want the car older than 12 years at the end of the loan term. For instance, if you want a 3-year car loan term then you can shop for cars 9 years and younger. Using the car as security gives lenders confidence that they will not be out of pocket if the loan repayments go into arrears. If this unfortunate situation occurs and you can no longer make your loan repayments, the lender will take possession of the car and sell it, using the proceeds to pay out the loan. If there are any remaining funds, they will be transferred to you less any fees and charges.

Personal Car Loan

This type of loan does attract a higher interest rate as no asset is secured against the loan. It is useful when wanting to purchase older vehicles. Once your personal car loan is approved the funds are transferred into your bank account so you can shop around for a suitable vehicle.

Business ABN Car Finance

Business ABN car finance is only for those with an active ABN. The most popular type of ABN car finance is a low doc car loan. Low doc car finance negates the need for up-to-date financials however some type of income proof is still required. This proof of income may be in the form of 3 months bank statements, a recent Business Activity Statement or an accountant’s letter.

Documentation required for a Car Loan

• Proof of residency or visa type. If you are in Australia on a working visa you will need to provide a copy of your visa. Your visa will show the commencement date and length of stay allowable. If you have been granted permanent or temporary residency in Australia, you will need to provide a copy of this.

• Pay slips. Lenders require 2 recent consecutive pay slips. Your pay slips will have your employers name, address, and their Australia Business Number (ABN). It will also show your employment status – either causal, contractor, part-time or full-time.

• Driver’s licence. Your driver’s license must allow you to legally drive on Australian roads. It must also show your current residential address in Australia. Your driver’s licence is usually used as a form of photographic identification. The other is your passport which may also be requested by certain lenders.

• Insurance. Once your secured car loan has been approved, but before funds are transferred to finalise the purchase of the car, you will need to comprehensively insure the vehicle. Insurance protects both yourself and the lender. Comprehensive insurance covers repairs to your car for damage caused by accidents, fire, theft, and weather. If the car is written off, then the insurer will pay you either the market value of your car or the value you agreed to with your insurer at the start of your insurance policy.

Estimate your car loan repayments

Online car loan calculators are a handy tool when trying to determine what you can afford. This car loan calculator only needs 3 inputs – your loan amount, the loan term, and an approximate interest rate. Loan terms can vary from 1 to 7 years. Your term will be determined by your visa length as all loans must be finalised 3 months before the end of your visa stay. Your interest rate will be determined by the type and age of the car that you wish to purchase as well as your credit history. You may well have no credit history in Australia. A loan statement from your home country can demonstrate to lenders that you have previously had a loan and paid it back on time.

How to apply for a Car Loan

Each and every lender has different lending criteria that are constantly being updated and changed. An experienced finance broker can navigate this complex minefield and get you the best loan to suit your individual circumstances. AAA Finance and Insurance has extensive experience, specialising in car finance and has access to over 40 different lenders. Call today on 07 5493 1222 to discuss your car finance requirements with one of our friendly finance team.