How to Finance a Car in NZ: Options, Costs and Tips

Got your eyes on a new or used vehicle? Are you looking for ways to finance a car in NZ? With so many options available, knowing which route to take can be challenging.

In this guide, we explain how car finance works in New Zealand, what you need to apply, how pre-approval and private sales work, what it really costs, and some common mistakes to avoid.

Want to talk it through with someone local? We have 25 branches from Kaikohe to Dunedin, plus our online team.. Apply online now or get in touch with one of our local branches to learn more about our car loan options.

How to Finance a Car in NZ at a glance

• The main ways to finance a car in NZ are a car loan, hire purchase or a lease.

• You'll need a current NZ driver licence to get a car loan with us, plus the usual details for any loan application.

• Pre-approval lets you shop knowing your budget, just like a cash buyer.

• Buying privately is fine. We do the checks on the car, including whether money is still owing on it.

• Interest rates range from 9.95% to 29.95% p.a. For example, $8,000 over three years at 19.95% p.a. is $73.19 a week.

What Kiwis borrow for cars

Most of the car loans we write are for between $5,000 and $10,000, followed by loans of $15,000 to $20,000.

The majority are for used cars, and more are for private sales than for cars bought from a dealer.

What is car financing?

Car financing is borrowing money to purchase a new or used car.

There are multiple ways to do this. In New Zealand, you can finance a car through a car loan, a hire purchase agreement, or a lease. This is usually done through a dealership, a bank, or other financial providers.

One of the most popular methods to finance a car is to take out a car loan, as it allows you to spread the cost of the purchase over a longer period of time.

Car finance can be used for both new and used vehicles and can be tailored to your financial situation and needs. It's important to understand the costs involved and the different types of loans available, so you can make an informed decision when taking out a car loan in NZ.

Secured and unsecured car loans

A secured car loan uses the car as security for the loan. If the car's value covers the full amount you borrow, it's fully secured. If the car is worth less than the loan, it's partly secured, which can affect how much you can borrow and the rate you're offered. We also offer unsecured personal loans, where no asset is used as security.

How we work out what the car is worth: we use a valuation guide, based on the car's market value. To be used as security, the car needs a current WOF and registration.

At Instant Finance, our team will work with you to find a car loan that suits your situation, with an interest rate personalised to you.

Get in touch with us today to talk it through.

What you need to apply for a car loan

You'll need the same information as any loan application, like proof of income and your bank statements, plus one extra: a current NZ driver licence.

A passport or other ID isn't enough for a car loan, because you need to be able to drive the car legally. You'll also need the car's details once you've found it, as it's used as security. Find out more about how to get a loan.

Get pre-approved before you shop

Pre-approval means applying before you start shopping, so you know exactly how much you can spend.

You're approved up to a set amount, and your loan is then secured against the car you choose. That means you can shop knowing your budget, just like a cash buyer, and negotiate with confidence.

If the car you pick costs less than your pre-approval, you may be able to use the difference for something else; just let us know what it's for.

And if you don't find the right car, there's no cost to you.

Buying privately or from a dealer

You can buy your car from a dealer or privately, wherever you find the right one.

Most of the cars we finance are bought privately. Either way, here's what to know.

• We do the checks. Because the car is our security too, we check it before your loan goes through, including whether there's still money owing on it. We often find cars for sale with money still owing to other lenders, especially in private sales.

• Be careful with online listings. Cars listed on online marketplaces can be higher risk, so take extra care, and don't pay any money until the checks are done.

• Get a mechanical inspection. We set the car's value from a valuation guide, but we don't inspect it, so it's worth getting a pre-purchase inspection for your own peace of mind.

• Expect a few differences with private sales. Private cars often come with little fuel in the tank and may not be as tidy as a dealer's, so allow for a fill-up and a clean.

• Your rights are different. When you buy from a dealer, you're covered by the Consumer Guarantees Act. Private sales generally aren't, which is another reason to do your checks.

Can you finance a car with no deposit?

Yes. With Instant Finance, you may be able to borrow the full price of the car with no deposit, subject to our usual lending criteria. A deposit isn't required, but putting money down does mean you borrow less and pay less interest overall.

 

Tips for finding the best way to finance a car in NZ

With so many car loan options and lenders available, make sure you take the time to research and compare your options. Below are some tips for getting the best car loan for you.

Tip 1: Compare interest rates.

Interest rates can vary significantly between lenders, so it's important to look around and compare rates to find the best deal.

A lower interest rate can generally save you money in the long run. 

You can compare the different types of loans available, and their costs, through comparison sites such as banked.co.nz.

Tip 2: Check your repayment options.

Consider the repayment options available to you.

For example, some lenders may offer flexible repayment options, such as making extra payments or paying off the loan early with no fee or a small charge.

Tip 3: Be aware of any additional fees.

Make sure you read the fine print and understand any additional fees or charges associated with the loan, such as application fees or early repayment fees.

These can add up and affect the total cost of the loan. You'll find all our fees on our rates and fees page.

Tip 4: Check your credit score.

Your credit history and other factors can affect your ability to get a loan and the interest rate you'll get.

So, check your credit score and financial history before you look for car loans in NZ. A less-than-perfect credit history doesn't automatically rule you out (more on that below).

Tip 5: Get pre-approved.

Pre-approval gives you a clear budget before you start looking, and puts you in the same position as a cash buyer when you negotiate (see the pre-approval section above).

Tip 6: Look into insurance.

Have you thought about your car insurance?

Most lenders will require you to have car insurance as a condition of the loan. Consider the cost of insurance when budgeting for the loan.

There are many different types of insurance, such as mechanical breakdown insurance, third-party insurance, and comprehensive insurance. Discuss your options with your lender to see if they meet the lender's requirements.

Worked examples

Here's what some common car loan amounts could cost at 19.95% p.a. (the middle of our rate range):

Totals include interest and fees. Interest rates range from 9.95% to 29.95% p.a. depending on your circumstances, so your repayments may be higher or lower. Try your own numbers in our loan calculator or see how much you can borrow for a car.

Common car loan mistakes to avoid

Now that you're all clued up about what to look for when applying for a car loan in NZ, here are some common mistakes people can make when taking out a loan:

1. Not considering the total cost – It's important you understand all costs associated with a loan, such as set-up and administration fees. You could also consider the cost of insurance, annual car service, and any add-ons you might want to buy for your car, like mud flaps, ski racks, etc.

2. Choosing the wrong loan term – It's important you understand the different loan term options available to you, and what this means for your regular repayments – generally speaking, shorter term loans will have higher regular repayments but cost less in interest overall. Here at Instant Finance, you can use our handy online loan calculator to look at different term options and what this might mean for your regular payments.

3. Borrowing more than you can afford – Borrowing more money than you can afford can negatively impact your financial situation and credit history if this leads to you missing repayment dates or defaulting on the loan. Calculate how much you can pay upfront to determine how much you'll need to borrow. As a responsible lender, Instant Finance will work closely with you to make sure you understand your regular repayment options and ensure these are within your means before any loan agreement is entered into. And if your circumstances do change during the loan term, our friendly team will work with you to get things back on track.

4. Skipping the checks on a private sale – Buying a car with money still owing on it, or with mechanical problems you didn't know about, can be an expensive mistake. Make sure the car is checked for money owing (we do this before we lend) and get a mechanical inspection.

Upgrading your car?

If you already have a car loan with us and want to change cars, you don't need to pay off your current loan first.

• Swap your loan to the new car. As long as the new car is worth the same or more, your loan can usually move across to it. A contract variation fee applies, and there may be PPSR fees too.

• Need a bit more? If the new car costs more, you may be able to top up your loan, as long as the extra repayments fit your budget.

• Selling instead? Find out how selling a car with finance owing works.

What it costs to own a car 

The loan is just one part of the cost. Make sure your budget covers:

• Registration and WOF, which you'll need anyway, and which a car used as security must have

• Insurance, often a condition of the loan

• Fuel, including that first fill-up on a private purchase

• Servicing, tyres and repairs

• A pre-purchase inspection before you buy

Our personal loan affordability tips can help you work out what fits.

 

Car finance with bad credit or on a benefit 

A less-than-perfect credit history doesn't automatically rule you out.

We look at your whole situation, including what you can comfortably afford to repay now, not just your credit score.

We may also be able to help if you're on a benefit, as long as you meet our responsible lending criteria.

Read more about bad credit car loans.

More car guides

• Why finance a car? The benefits

• How much can I borrow for a car?

• How to buy a car

• What to check on a second-hand car

• Car loan vs personal loan

• Car leasing in NZ

• Bad credit car loans

• Selling a car with finance owing

• Selling a vehicle in NZ

• NZ's most stolen cars

Talk to a car loan provider today 

At Instant Finance, we offer a range of car loan options to suit your situation.

Contact us online or visit us at one of our branches.

We won't let you get in over your head: we'll go through your budget with you to make sure the repayments fit.

FAQs

Is it a good idea to put a car on finance?

Financing a car can be a good choice if it lets you buy a vehicle that meets your needs while the repayments fit comfortably in your budget. At Instant Finance, car loans are tailored to your situation, so car ownership is more accessible without putting a strain on your finances.

What is the best amount of years to finance a car?

The ideal loan term depends on your budget and financial goals. A shorter term generally means higher regular repayments but less interest paid overall, while a longer term offers lower repayments but may cost more in interest. Instant Finance can help you find a term that balances affordability with the total cost.

Can you sell a car with finance owing in NZ?

Yes, but the outstanding loan needs to be dealt with first. Usually that means paying it off before ownership transfers. If you're upgrading to another car with us, you may be able to move your loan across to the new car instead, as long as it's worth the same or more.

What do you need to finance a car in NZ?

You'll need the same information as any loan application, like proof of income and your bank statements, plus a current NZ driver licence, because you need to be able to drive the car legally. A passport or other ID isn't enough for a car loan. If the car is being used as security, it'll need a current WOF and registration.

How much would a $30,000 car loan cost a month?

At 19.95% p.a. over five years, a $30,000 car loan works out to $803.01 a month, or $186.93 a week, including interest and fees. Your actual repayments depend on your interest rate (from 9.95% to 29.95% p.a.) and the loan term you choose.

How much will I pay back on a $40,000 car loan?

At 19.95% p.a. over five years, you'd repay $64,422.80 in total on weekly repayments of $247.78, including interest and fees. A shorter term or a lower interest rate would bring the total down.

What's the smartest way to finance a car?

Borrow only what you need, choose the shortest term you can comfortably afford, and compare the total cost of the loan (not just the repayments), including fees. Getting pre-approved before you shop also helps, as you'll know your budget and can negotiate like a cash buyer.

Can I finance a car with no deposit?

Yes, you may be able to borrow the full price of the car with no deposit, subject to our usual lending criteria. Putting money down means borrowing less and paying less interest overall.

Can I get car finance if I'm on a benefit?

We may be able to help if you're on a benefit, as long as you meet our responsible lending criteria. We look at your whole situation, including what you can comfortably afford to repay.