How to buy a car on finance in New Zealand

The nine steps in short

1. Work out what you can afford each week.
2. Check your credit file.
3. Decide how you will borrow.
4. Get your documents ready.
5. Find the car and check it.
6. Compare the finance offers on total cost.
7. Read the disclosure statement and the contract.
8. Sign, pay any deposit and arrange insurance.
9. Keep up the repayments.

The rest of this page goes through each step. If you want the shorter version first, our page on how car finance works explains the mechanics.

Step 1: Work out your weekly number

Before you look at any car, work out what you can spend on one. Repayments are only part of it. Count:

• The loan repayment
• Insurance, which a lender may require while the loan is open
• Registration and warrant of fitness
• Fuel or charging
• Servicing and repairs

Subtract those from your spare income, not your gross pay. A lender will do a similar calculation, because under the Credit Contracts and Consumer Finance Act it has to check that the loan is suitable and affordable for you. Our guide to what it really costs to own a car has a worksheet, and the repayment calculator turns a price into a weekly figure.

Work backwards. If your weekly limit for the loan is $75, that points to a car price. It does not point to the car you saw online.

Step 2: Check your credit file

Lenders look at your credit file. Get your free report from Centrix, Equifax or Experian (formerly illion) and read it for errors. Our page on how to get a free credit report shows how. If something is wrong, ask the credit bureau to correct it before you apply. If you have defaults or missed payments, they will show, and lenders weigh them differently. See car finance with defaults for how that works.

Checking your own file is not the same as a lender checking it. A soft credit check is a lighter check than a hard one. Soft credit check car finance explains the difference.

Step 3: Decide how you will borrow

There are a few ways to pay for a car on finance, and they behave differently:

Option	How it works	Watch for
Dealer finance	Arranged at the yard, tied to the car	Fees built in, a limited choice of lenders
Secured car loan	Lender holds a security interest in the car	Repossession if you default
Unsecured personal loan	Not tied to the car	Often a higher rate, but no repossession of the car
Hire purchase	You pay in instalments and own the car at the end	You may not own it until the last payment

Our guides to secured vs unsecured car loans and dealer finance vs broker vs bank compare these in detail. The right one depends on your credit, the car and whether you are buying privately.

Finance first, or car first?

If you can, get an idea of what you can borrow before you choose a car. It stops a dealer deciding your budget for you. Some lenders will pre-approve you for a range, and others only finance a specific car once it is chosen. A pre-approval is not a final decision, because the lender still checks the car and your details. Read car finance pre-approval for how it works.

Step 4: Get your documents ready

Lenders usually ask for the same things. Having them ready saves days. Typically that means:

• Your driver licence
• Proof of income, such as payslips, bank statements or benefit statements
• Proof of address
• Details of your debts and regular spending
• Details of the car, once you have one

See what you need to apply and car finance requirements for the fuller list. A complete application is quicker to assess than an incomplete one. Timing depends on the lender and your paperwork, so how long car finance approval takes is worth a read.

Step 5: Find the car and check it

A finance contract ties you to the car, so check the car properly.

• Search the PPSR. A PPSR check shows whether money is owing on a car, so you do not buy someone else’s debt.
• Get an inspection. An independent inspection costs less than most repairs.
• Ask about the history. Service records, number of owners and how the car was used.
• Look at the Consumer Information Notice. Check that the cash price on it matches the contract price.

If you are buying from a private seller, the rules are different, and there is less comeback if the car is faulty. Our guide to financing a car from a private seller covers that.

Step 6: Compare offers on total cost

Weekly payments are the number lenders and yards lead with. The number that matters is what you repay in total. Compare:

• The interest rate
• All fees, including establishment, admin and early repayment
• The term
• The total repayment compared with the cash price

Example (illustrative numbers only)

You buy a $12,000 car with a $2,000 deposit, so you borrow $10,000. At 15% a year, over three years, the repayment is about $347 a month and you repay about $12,480. Over four years it is about $278 a month and about $13,359. The longer term feels cheaper each month and costs about $880 more in total. These are round figures to show the method, not offers. Your rate is the lender’s decision, so use the repayment calculator to try your own.

Step 7: Read the disclosure and the contract

Before you are bound, the lender must give you a disclosure statement in plain language. Consumer Protection says it must show:

• The amount owing, payment terms and details
• The interest rate and how it is calculated
• Fees and charges, and any security interests
• Late or missed payment penalties
• What happens if you cannot repay, such as repossession
• Your rights to change terms or cancel

Read it, then read the contract. Check that the cash price matches the Consumer Information Notice. Ask what every fee is for. Take the documents home overnight if the yard will let you, and get advice if anything is unclear. Consumer Protection’s guidance is that if you are in doubt, leave the car at the yard and get independent advice.

Also check any extras. Credit insurance, extended warranties and repayment waivers can be added to a loan. They are optional products with their own costs, and they raise your total repayment. Ask whether they are included and whether you can say no.

Your right to cancel

The Credit Contracts and Consumer Finance Act gives you a short window to cancel a consumer credit contract. Consumer Protection says it is five working days from the start of the loan, in writing or electronically, and it stretches to seven working days if documents were emailed and nine if they were posted. Weekends and public holidays are not working days. If you cancel but still want the car, you have 15 working days to pay the cash price. If you did not get a disclosure statement, or it was wrong, you can cancel at any time. More detail is in our page on the car finance cooling-off period.

Step 8: Sign, pay and insure

When you are happy:

1. Sign the contract and keep copies of everything.
2. Pay any deposit by a traceable method, and get a receipt.
3. Arrange insurance. Many lenders require comprehensive cover while the loan is open.
4. Register the car in your name and keep the paperwork.
5. Note the first repayment date and set up a payment so it is not missed.

The lender usually registers a security interest against the car, which means you cannot sell it until the loan is cleared. If you want to sell it later, see selling a car with finance owing.

Step 9: Look after the loan

Most trouble starts with a missed payment. Keep the account in credit, and pay on payday if you can. If life changes, tell the lender early. Under the Act you can ask to change your contract because of unforeseen hardship such as illness, injury or job loss. The options include a longer term with smaller payments or postponing payments for a set period. The lender must acknowledge a request within five working days and decide within 20 working days. See struggling to pay your car loan if it gets hard.

Early repayment is often possible, though a fee may apply. Check your contract. Our guide on paying off your car loan early explains it.

Red flags

• A yard that will not show the total repayment.
• Pressure to sign today.
• A cash price on the contract that does not match the notice on the car.
• Extras that appear in the loan without you asking.
• A promise of approval before the lender has seen your income. Nobody can promise it.
• A car that fails the PPSR check or has no history.

How Fair Finance helps

Fair Finance is a referral service, not a lender and not a financial adviser. One application and one soft credit check go to a panel of approved New Zealand lenders, so you do not have to apply lender by lender. Lenders decide case by case. We are paid by the lender only when a loan settles, and that does not change your rate. The quick check is the place to start, or go to apply when you are ready.

Checklist

• Weekly budget worked out, with running costs
• Free credit report checked for errors
• Borrowing route chosen
• Licence, income proof and address proof ready
• PPSR check and an inspection on the car
• Offers compared by total repayment
• Disclosure statement and contract read
• Extras queried and fees explained
• Insurance arranged
• Copies of everything kept

General information only, not financial advice. Rules and timeframes can change, so check the official pages below.

Sources

• Consumer Protection: Loan for your car
• Consumer Protection: Credit Contracts and Consumer Finance Act
• Consumer Protection: Loans and lenders
• Sorted: Before you use credit
• PPSR: Search the register