6 Steps to Take Before Applying for a Second-Hand Car Loan

Buying a second-hand car doesn’t have to be stressful. Here’s how to get things sorted so you can hit the road sooner.

Shopping for a second-hand car can be exciting, but it’s important to get your finances and facts straight before applying for a loan. Whether you’re buying your car from a dealer, through an online marketplace or privately, we’ve created a simple checklist to help you feel confident before you drive away.

1. Check to see who actually owns the car

Imagine paying the money and driving away in your ‘new’ used car, only to find out months later it was owned by someone else. This happens more than you may think. A Personal Property Securities Register (PPSR) search checks for encumbrances (such as an unpaid loan) on the vehicle before you buy it and tells you if the person selling it actually owns the car (as opposed to their financier).

For just two dollars, you can put the car’s VIN (vehicle identification number) into the search field on the Australian Government's online noticeboard to check if it’s safe to buy. This will also let you know if the car has ever been in a repairable write-off or stolen.

2. Make sure your second-hand car is roadworthy

A Roadworthy Certificate (RWC) or Safety Certificate confirms that the car meets minimum safety standards and can be legally registered. This is mandatory in some states of Australia, but not all. This is one of the most important steps in the used-car buying process, and is one that might cost you a lot more down the track if you choose against it.

A RWC checks everything from seatbelt tension to the windows, safety features and the chassis. Before applying for a car loan and securing that purchase, it is a good idea to ensure you have your official RWC or safety certificate for the vehicle.

Here is a list of states in Australia that include an RWC or safety certificate as part of the selling and buying process:

• In Queensland, Victoria and the Australian Capital Territory: Sellers must provide it before the vehicle is transferred into another name or entity.
• In New South Wales: Buyers need a pink slip (eSafety check) to transfer the registration if the vehicle is more than five years old.
• In Western Australia, South Australia, Tasmania and the Northern Territory: An RWC or Safety Certificate is not always mandatory.
  
  

3. Know the car’s true value and your budget

Overpaying means you will end up borrowing more than the car is worth. This is why it’s important to research the make and model of your vehicle to ensure you are paying the market value price. Set a budget and ensure you can afford the repayments before you apply by using our handy online car loan repayments calculator.

4. Choose the right type of loan to suit you

When you’re ready to finance your purchase, you might notice two common options: a secured car loan or an unsecured personal loan. While an unsecured loan can seem faster and more straightforward, it usually comes with a higher interest rate, a shorter loan term and higher repayments. A secured car loan typically offers a better deal, and the extra steps involved – such as providing proof of insurance or an invoice from the seller – are industry standard to protect both you and your lender. Taking an extra day or two to supply these documents could save you significantly over the life of your loan.

5. Check your credit score before you apply

There’s nothing worse than finding the ‘unicorn’ car – right model, right price, low kilometres – only to be told no when you apply for your loan. Your credit score can impact your ability to get finance, so make sure you are aware of what your score is before applying, and allow yourself time to correct any outstanding debts or payments that may hinder your ability to get a car loan approval.

6. Have the correct documents ready before you apply for your car loan

So you’ve found the right car, completed all your checks and balances, and now you’re ready to apply for your car loan. This is the information you will need on hand in order to hit apply:

• Driver’s licence
• Proof of income, such as payslips or bank statements. At Jacaranda Finance, we use a secure ready-only link to view the last 12 months of your bank statements.
• Employment status and details. We will need to check that you have been employed on a permanent or casual basis with consistent income for the last 90 days.
• Vehicle information such as make, model, VIN, registration, and the seller’s information.
  

Need a car loan up to $30,000? We offer fast car loans for second-hand vehicles, whether you’re buying from a dealer or a private seller. Learn more about how you can apply online in minutes¹ and get pre-approved today.