New car finance in New Zealand: how to choose the right route
You can finance a new car through the dealer, through a bank or finance company you arrange yourself, or through a lease. The sticker price and the weekly figure hide a lot, so compare the total repayable, the fees and any final balloon payment. Nobody can promise approval, and lenders decide case by case.
The short answer
Financing a new car is the same basic process as financing any car: you borrow money, the car is usually the security, and you repay over a set term. What changes is the size of the loan, the sales environment you are in, and the offers on the table.
There are three common routes:
- Finance arranged by the dealer. The dealer submits your application to one or more lenders, sometimes including the car maker’s own finance arm.
- A loan you arrange yourself. You apply to a bank or finance company first, then shop as a cash buyer.
- A lease or novated lease. You pay to use the car rather than own it outright. See car leasing and novated leases.
Fair Finance is a referral service, not a lender and not a dealer. One application and one soft credit check go to a panel of approved New Zealand lenders. We are paid by the lender only if a loan settles, and that never changes your rate. Nobody can promise approval.
Dealer finance or your own loan
At the dealer. It is convenient: you choose the car and sort the money in one visit. Some dealers are upfront about rates and fees, and some quote only a weekly payment. The risk is that the car price, rate, fees, insurance and extras get folded into one figure while you are deciding about a car you want. Dealers may also earn a commission from the lender for arranging finance. That is common across the industry, so it is fair to ask what it is.
Your own loan. You find out what you can borrow before you walk in. ASB and ANZ both advertise loans for a new or used car, van or ute with terms running from six months to seven years, so a bank loan can sit alongside whatever the dealer offers. The dealer then competes with a number you already hold. Our guide on car finance pre-approval explains the process, and dealer finance vs broker vs bank compares the routes.
The point is not that dealer finance is bad. It is that you should be able to compare it with something.
Manufacturer offers
New cars often come with a promotional rate or a “finance deal” from the brand. These can be good value, but check three things:
- Is the offer tied to a short list of models or to paying the full advertised price? A low rate paired with no room to negotiate on price can cost more than a slightly higher rate on a cheaper car.
- Is there a final balloon payment? Low weekly payments are often paired with a big lump sum at the end.
- What fees apply? Ask for the establishment fee, the monthly account fee and the total repayable in writing.
Keep a dealer’s offer, with a date on it, so you can compare it with other quotes.
Balloon payments
A balloon (also called a residual or final payment) is part of the loan you leave unpaid until the end. Our glossary entry on balloon payments covers the basics. It lowers the repayment each week or month, which is why it appears in so many new car adverts.
The catch is that you still owe it. At the end you can usually pay it in cash, sell the car and pay it from the proceeds, or arrange a new loan for it. If the car is worth less than the balloon, you pay the gap. Lenders also check that you can afford the repayments, and you should check that you can afford the balloon too.
Add-ons rolled into the loan
New car deals often come with extras: paint protection, extended warranty, mechanical breakdown insurance, GAP insurance, tinting, floor mats. Some are optional, and some are priced well above what they would cost elsewhere. If they are added to the loan, you pay interest on them as well.
The Consumer Protection website says you should not be made to take insurance that does not suit your needs, and that you should check “free” extras are not being paid for through the loan. Read our guide on mechanical breakdown insurance, and ask for each add-on to be priced separately. We describe these products here and do not recommend any.
A worked example
The numbers are illustrative, not a quote. Say a new car costs $35,000 with no deposit, and the rate is 9.5% a year over five years (assumed for the example).
| No balloon | 30% balloon ($10,500) | |
|---|---|---|
| Repayment per month (approx.) | $735 | $598 |
| Total repaid over five years | about $44,100 | about $46,400, including the balloon |
| Owing after five years | $0 | the $10,500 balloon, unless you pay it |
The balloon loan is about $137 a month cheaper, but costs roughly $2,300 more in interest and leaves a $10,500 bill. That might be fine if you plan to sell the car at that point, and it might not if your income is tight. The repayment calculator lets you test your own numbers.
Bad credit and a new car
A new car is not out of reach with a marked credit file, but it is harder. The loan is usually bigger, so the repayment is higher, and lenders look at your income and spending against it. If you have defaults, missed payments or a judgment, see low credit score car finance and bad credit car finance. A cheaper car or a used one may give you a lower repayment and better odds. Our used car loan page covers that route.
New ute and new van
New utes and vans follow the same steps, but a few points differ:
- Work use. Lenders may ask how the vehicle will be used and whether the income comes from the business.
- Higher prices. A new double-cab ute can cost much more than a new small car, so the loan can be large.
- GST and tax. If the vehicle is used for business, the treatment of GST and tax is a question for an accountant or Inland Revenue. We do not give tax advice.
See ute finance and business vehicle finance.
Red flags
- Only the weekly payment is quoted. Ask for the interest rate, fees and total repayable.
- A disclosure statement that is missing or does not match the price. The Consumer Protection website says you can cancel if disclosure is missing, wrong or illegible.
- Pressure to sign before you have read the contract. You can take the contract home.
- Add-ons you did not ask for.
- A balloon you have no plan for.
- Anyone promising approval before seeing your income and credit file.
What to do next
- Set a total budget, including insurance, registration, warrant of fitness, servicing and fuel or charging.
- Get a written quote from a lender you arrange yourself.
- Ask the dealer for theirs, in writing, with the total repayable.
- Compare the two on total cost, not the weekly figure.
- Use the quick check if you want one soft credit check to go to a panel of lenders.
Checklist
- Total budget set, including running costs
- Rate, fees and total repayable in writing from at least two sources
- Balloon, if any, understood and planned for
- Each add-on priced separately and decided on
- Insurance quote for the car
- Cash price on the contract matches the price you agreed
- Contract read at home before signing
General information only, not financial advice. Rates, offers and rules change, so check the official pages below.
Sources
Common questions
Is it cheaper to finance a new car through the dealer or my own loan?
Neither is always cheaper. Dealer finance can include a manufacturer offer, but it can also bundle fees and add-ons into one weekly number. Get a written quote from the dealer and one from a lender you arrange yourself, then compare the total amount repayable and every fee.
Can I get finance on a new car with bad credit?
Some lenders consider applications with defaults or missed payments, usually at a higher rate or with a deposit. A new car also means a bigger loan, which is harder to place on a tight income. Lenders decide case by case, and nobody can promise approval.
What is a balloon payment on a new car loan?
It is a lump sum left owing at the end of the term, which lowers the regular repayment but leaves a large bill to pay, refinance or settle by selling the car. If the car is worth less than the balloon, you still owe the difference. Work out how you would pay it before you agree.
Can I finance a new ute or van?
Yes, new utes and vans are financed in much the same way as cars. If the vehicle is for work, the lender may ask about business income and how the vehicle is used. See our pages on ute finance and van finance for the extra points.
Do I need a deposit to finance a new car?
Not always, but a deposit or a trade-in lowers the loan, the repayment and often the rate. With a new car, a deposit also helps because the car's value can drop quickly after you drive it away, leaving you owing more than it is worth.
Can I cancel new car finance after I sign?
The Consumer Protection website says you can cancel a credit contract within five working days of disclosure, though if you still want the car you have a short time to pay the cash price. If the disclosure statement was missing or wrong, other rights apply. Read the official page before relying on this.
See your repayments, then get a fair rate.
One application, one soft credit check, no obligation. We match you to the lender most likely to give you a fair go.