Calculating the cost of car loans

If you're looking to buy a new or used car, chances are you're also in the market for a car loan. So as well as finding the right set of wheels, you also need to make sure you're getting the best finance deal.

The Retirement Commission's independent personal finance website www.sorted.org.nz has '8 rules for car loans' that can help you make the right decision.

1. Work out how much you can afford to spend on a car before you go out shopping.

2. Don't forget to include annual running costs, insurance and maintenance in your budget.

3. Check out the deals offered by as many lenders as you can before hunting for a car. Look for a loan or finance deal that has a good interest rate and charges low fees.

4. If you already have business with a bank or credit union, see what they can offer.

5. By law you must be given a disclosure statement detailing all the terms of the credit deal before you sign or within five working days of signing. Ask for a copy of this statement and read it carefully before you agree to any deal.

6. Work out the total interest you will pay on your purchase. Try the new Car loan calculator on www.sorted.org.nz.

7. Avoid taking on several finance and hire purchase deals at once. It can be difficult to keep track of when each deal has to be paid off and it can be hard to find the money to service many debts running at the same time.

8. Take your time to decide. When you're borrowing money a rushed decision can be costly.