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What is a Car Loan?

A car loan is a fixed term, fixed interest rate, secured loan used to purchase a new car or upgrade an old car with fixed loan repayments.

What you will learn in this Car Loan Guide:

  • How a car loan works
  • Benefit of a car loan
  • What security is used
  • Insurances explained
  • The difference between a car dealer and private sale
  • How to apply and qualify

How does a Car Loan work?

A car loan is used to fund the purchase of a new car or upgrade and old car. Once you have found the car you like or have an idea on the amount you want to spend you can apply for a pre-approval to purchase a car.

Once you have found the car you like the finance company will pay the seller using the proceeds of the loan you have been approved. You then make you weekly, fortnightly or monthly repayments until the vehicle loan is finished.

The Benefit

Using car finance to buy your new car instead of using cash means you can use the money you have for other things like:

  • Clearing some other short-term debt that has higher interest rates
  • Keep your money for emergencies
  • Travel
  • Renovations to your property

Most car loans can be paid off at any time with minimal early settlement fees. Our early settlement fee is $75.

What security is used?

Usually the car you are purchasing will be used as security for the car loan. In some cases additional security may be asked for such as:

  • Property
  • Motor vehicles – Including cars, trucks & motorbikes
  • Boats & Jetskis
  • Business assets
  • Household chattels

Types of insurance you can get with your Car Loan

The main insurances offered when doing a car loan are Payment Protection Insurance (PPI), Guaranteed Asset Protection (GAP) and Mechanical Breakdown Insurance (MBI). We use Autosure to provide our customers the protection they need.

What is PPI?

Payment Protection Insurance protects you for your repayment obligations should you suffer an insured event. What this means is the Insurance company will maintain your loan repayments or in some instances settle your loan. We offer three types of policies based on your employment as per the below table.

EmployeeSelf-EmployedEveryday Essential
Insured Events:

Death, Terminal Illness, Accident, Illness, Disability, Hospitalisation, Carer, Redundancy, Suspension, Employer Ceases Trading

Insured Events:

Death, Terminal Illness, Accident, Illness, Disability, Hospitalisation, Carer, Business Interruption

Insured Events:

Death, Terminal Illness, Hospitalisation, Permanent Disability


The benefits of having PPI relieving any stress you may be under should you be impacted by one of the insured events. This enables you get on with recovery or seeking new employment without having to worry about making your loan repayments.

What Is GAP?

Guaranteed Asset Protection protects you against losses that may occur when your vehicle has been written off by your insurer. How GAP works is if there is a shortfall in what the Insurance company pays and what is owing to the Finance company you GAP policy may cover the difference.

GAP does come with many other benefit’s so it is important to check your policy.

What is MBI?

Mechanical Breakdown Insurance covers the reasonable cost to have your car repaired. Cars these days have many mechanical and electrical components and some of these can be very expensive to replace. The last thing you want when buying a car is to have it break down.

MBI helps cover some of these cost’s and has some additional benefit’s like:

  • Protection for petrol, diesel, hybrid and electric vehicles
  • Maybe able to help with towing or a rental car
  • 7 day / 24 hour AA Roadservice

Again it is important to check your policy document to see all of the cost’s and benefit’s of having a MBI policy.

Should I buy from a Car Dealer or private sale?

Both options have pro’s and con’s and below is a list of things to look out for:

Car Dealer

Covered by the consumer guarantee’s actCar dealers are often more expensive
Compare models and brands in one location
Trade in’s will be available
Finance can be arranged on site
Clear title to vehicle


Private Sale

Often cheaper than a car dealerNot covered by the consumer Guarantee act
Always a large range availableHow do I know the seller owns the car?
Is there any finance owing on the car?
No trade in’s
Have to arrange own finance


You do get more protection when buying from a car dealer and gain access to Finance and insurance products in one location, In saying that buying privately can be a good option you just have to do a bit more work like:

  • Check the ownership of the vehicle
  • Check PPSR to see if any finance is owing on the vehicle
  • Arrange own finance and insurances
  • Organise to have the vehicle inspected

Still a great option just a few more things to think about!

How to apply

You can apply for a car loan with Pioneer Finance if you are:

  • Over the age of 18; and
  • A New Zealand Citizen, Permanent Resident or in some instances on a work visa; and
  • Are employed or have a regular source of income i.e Job, Self-employed or receive a benefit

You do need to show that you have the affordability for the loan and that you are who you say you are. You can do this by providing the following:

  • Proof of Identity – i.e passport or driver’s license
  • Proof of Address – Bank statement, utilities bill or a letter from a government department
  • 3 Months bank statements

Depending on the security offered for the loan we may require further information such as rates notice, mortgage statement’s or proof of purchase.

What checks will you complete using my information?

Depending on the security offered we will do checks with the following registers:

  • Credit checks with 1 or more of the following Equifax, Centrix or Illion
  • PPSR
  • Land online
  • New Zealand transport
  • Driver check

Don’t worry if your credit check has a couple of bumps and bruises we may still be able to help you.

Car Loan Fees and Charges

Car loans will have various fees attached, which may include:

  • An establishment fee once you loan is approved and you have accepted the terms
  • Ongoing monthly account fees
  • Security registration fees
  • Caveat registration fee
  • Penalty fees for late payment
  • Early settlement fee
  • Caveat removal fee
  • One-time broker fees if using a finance broker

Some of these fees will be charged to the loan upfront or are calculated in your weekly, fortnightly or monthly installments. Other fees can be charged at the end of the loan term such as early settlement fees or if you used your property as security a caveat removal fee can be charged.

For more details on our fees and charges go to our Interest rates and fees page in the important information section.

Car Loan Repayment Example:

Amount Borrowed $10,000.00

Establishment Fee $395.00

Payment Protection Insurance $824.48

PPSR Fee $8.05

Total including fees and insurances $11,227.53

Interest Rate 16.95%pa

Monthly Account Fee $12.00

Loan Term 36 Months

35 Monthly repayments of $411.85 plus 1 final repayment of $411.41

The above is an example of a common loan request and gives you an indication of what the monthly loan repayments will be. Your establishment fee may be different depending on the security used and the time taken to process your application. We would also like to point out that the Payment Protection Insurance used in this quote is not compulsory.

Car Loans summary

In summary, car loans with Pioneer Finance:

  • Are fixed-term, fixed-rate secured loans
  • Are arrange online, over the phone, in one of our two branches in Wellington & Auckland or through a finance broker
  • Repayments can be made weekly, fortnightly or monthly
  • Interest rates range from 6.95%pa to 16.95%pa
  • Loan terms can be from one year to seven years in length

If you are over the age of 18 (up to the age of 21 you may require a guarantor), a permanent resident of New Zealand, earn a regular income, and can demonstrate the ability to repay the loan, you may qualify for a vehicle loan.

We offer loans from $1,000 to $50,000 for a vehicle loan in New Zealand. The amount we lend does depend on the security offered for the loan. The more security offered the better chance we will be able to lend the amount you require. We will also need to check your affordability and credit profile.

Yes. Your credit history may not be as bad as you think. Let us do the background work and we’ll take it from there. You do need to show us that you can afford to pay the debt consolidation loan, and you will need security, and may need a guarantor.

Approval time depends on some variables:

  • How much information you provide, the more information you provide the quicker we will be able to give you an answer.
  • Larger loans tend to take a little extra time
  • Loans with property involved can also take a little longer to get approved

In saying that we do endeavour to give a same day answer on all applications received.

Yes, you can make extra repayments; or you can increase your minimum repayment to help pay your loan off earlier. We do charge a small early settlement fee of $75.

Applying at multiple finance companies will no longer affect your credit rating in New Zealand. Since October 1st 2019 every credit check done by a finance company is listed as a quote with Equifax, Centrix or Illion and will only affect your credit rating should you accept the loan offer.