How to get an EV loan pre-approval in New Zealand?

There’s just something about the feeling of getting behind the wheel of a new vehicle - or one that’s new to you. And it might feel even better if you knew that the car you’re driving is likely to be using a lot less fuel than your previous one.

Electric vehicles and hybrids have become increasingly popular in recent times, as rising fuel prices have focused New Zealanders’ attention on what they pay to fill up their cars. At the same time, there are more options available in this country at a range of price points, and the used car market has grown. There’s a lot more choice for anyone who’s considering buying.

The purchase of any vehicle is a significant decision, and electric vehicles are no different. Many people want to know what their budget might be before they start looking at their options. This is where a loan pre-approval can be a big help. When you are pre-approved for a loan for your EV or hybrid, you’ll have a clear idea of your borrowing limit before you get emotionally invested in the buying process, and you’ll be able to focus on the vehicles in your price range.

Here, we’ll explain what pre-approval is, how it works, why it helps, what lenders check when they’re issuing a pre-approval, and what you can expect from the whole process.

What Is Pre-Approval for an Electric Car Loan?

When we talk about “pre-approval” in the context of a loan for an electric vehicle, we’re referring to a conditional indicator given to a purchaser by the lender of how much they might be able to borrow based on the information that is provided.

If you’re about to embark on the car buying process, you’ll usually get your pre-approval before you choose a specific vehicle. This gives you a good idea of the budget you’re likely to be working with. A pre-approval is not the same as a guarantee of a loan, and you’ll still need to go through some final checks and lender approval when you decide on a vehicle. But it can give you a lot more clarity on what could be possible.

How It Differs From Final Approval

When you apply for pre-approval, lenders will look at your income and expenses and probably complete a credit check. The assessment will consider what you can afford to repay and how creditworthy you are. You’ll usually be given a pre-approval that’s subject to conditions.

When you’ve chosen a vehicle, you’ll start ticking off those conditions. The lender will need to confirm that the car you want to purchase is acceptable to lend on and may need more documentation from you. Sometimes the amount that you can borrow can change between the pre-approval stage and final approval, usually in cases where your own situation has changed and the lender no longer thinks you can afford the same amount of borrowing, or the vehicle doesn’t meet the lender’s criteria to borrow the full amount.

Why Get Pre-Approved Before Shopping for an EV?

There are lots of good reasons to get a pre-approval before you start shopping for your EV.

Know your budget 

Your pre-approval can give you a clear idea of what you are likely to be able to afford to spend. This gives you a realistic price range to start looking at vehicles in, instead of guessing and hoping for the best. When you have these parameters, you can more accurately compare vehicles to work out what might be an appropriate choice.

You can move more quickly 

It’s often the case that good EVs at a fair price are not on the market long. Having pre-approval should make the process to final loan approval faster. It means you’re ready to complete the purchase, which may make you more appealing to sellers, too.

You’ll know your repayments

A pre-approval also gives you time to consider how your loan will fit into your household budget. You can plan out your finances before you commit to a purchase, and think about whether weekly, fortnightly or monthly repayments are likely to work best. You can use our repayment calculator to see how it might work.

Two Ways to Finance an EV in NZ

There are two main ways that people finance an EV in New Zealand at the moment.

A green loan from a bank 

Many banks offer low- or no-interest loans for eco-friendly purchases such as solar power and electric vehicles to their home loan customers.

This can be an attractive option if you’re a homeowner. You’ll usually need to have at least 20 percent equity. The low interest rate is also for a fixed term and reverts to a higher rate if the amount is not paid in full at the end of that term.

Sometimes buyers are required to purchase an EV from an approved dealer.

It’s also important to note that if you end up adding some of the amount borrowed to your home loan and paying it back over a long period of time, such as the remaining term of your home loan, it can mean you pay more interest overall than if you had a higher-interest loan for a short time.

A personal or specialist EV loan, with no mortgage required 

You may be able to borrow the money for the purchase as a personal loan. This can be a good option for people who do not have a home loan, or those who want to keep their car finance separate from their mortgage.

The loan can be secured against the vehicle, or you may qualify for an unsecured loan. Secured loans generally have lower interest rates. You will usually be offered fixed interest rates for the term of the loan, and repayments that do not change. It may be possible to borrow with no deposit. It may be possible to borrow for a private or dealership sale.

What Do Lenders Look At?

Your income 

Lenders will want to see that you have stable employment or other regular, reliable income that will give you enough money coming in to service your loan on top of your other financial obligations.

Your expenses

The lender will also look at the other commitments you already have and your everyday living costs. This will then be compared against your income to work out what sort of loan repayments are likely to be affordable.

Your credit history

Lenders will also want to see that you have a pattern of responsible borrowing over time. When you can show that you’ve been able to pay back loans you’ve taken out previously, or pay your bills on time, it may give you more options.

Your existing debts

Any other personal loans, credit cards, vehicle finance or buy now pay later arrangements you currently have in place will all be counted as part of the lender’s assessment. The lender will look at your total level of borrowing compared to your income and also how much the repayments are. It may be sensible to consider whether any of the credit facilities you have could be closed or cleared if you’re thinking about making an application for a new loan.

The vehicle itself

If you’re borrowing to buy an EV or hybrid, it’s likely that the loan will be secured against the vehicle. That means that the age and condition matter to the lender, particularly if you’re buying a used car. Lenders may have a cap on how old they will allow a car to be at the end of your loan term, which may mean you need to take a shorter loan if you’re considering buying an older vehicle.

The lender may also be interested in the battery health of the vehicle and any remaining warranty because batteries can be expensive to replace.

Documentation

When it comes to applying for your pre-approval, you’ll need to provide the lender with some paperwork. This will usually include proof of identity, such as your driver’s licence or passport, proof of your income, which usually comes from recent payslips, your recent bank statements, details of any other loans or commitments you have, and potentially your proof of address.

Having these ready ahead of time may make the process smoother.

Tips to Improve Your Chances of Pre-Approval

We’re here to help, but there are also steps you can take to improve your chances of pre-approval.

Consider what’s affordable

Thinking about your current financial life, you may be able to come up with an idea of what’s likely to work for your budget. Remember to factor in costs like insurance, charging your EV and road user charges, as well as the potential cost of the vehicle itself and the loan repayments you might pay.

Reduce unnecessary debt

If you have any high-interest debt, it may be sensible to pay this off if you can, or consider ways to reduce the cost. That could mean considering debt consolidation.

Avoid multiple applications 

Making a number of applications within a short period of time can decrease your credit score and make other lenders consider whether you’re stretching your financial life too thin. When you work with us, our team will help you consider what might be suitable before you make an application, so you only apply once.

Prepare your paperwork 

Get your ID, evidence of income and bank statements together so you’re ready to go.

Check your credit report

You can get a copy of your credit report for free. This could give you a chance to correct any errors and make sure you know what a lender will see if a report is run on you.

How the Pre-Approval Process Works

There are a few steps to work through when you’re at the pre-approval stage.

Complete an application 

You’ll give us your financial information, including your income, expenses and an idea of what you would like to borrow. This is done through a short online form that should only take a few minutes.

Assessment

We’ll look at your information and compare that to lender criteria. We’ll also complete an affordability check, and lenders are also required to do this under the Credit Contracts and Consumer Finance Act. We’ll talk to you about what you need and answer any questions you may have.

Choose your electric vehicle

This is the fun part. You’ll need to find an appropriate EV in your budget. If it’s a used EV and you’re buying privately, it’s sensible to run a PPSR check at ppsr.companiesoffice.govt.nz to make sure that there is no finance still owing on the vehicle.

Final approval

We’ll confirm the vehicle details and finalise the loan application. Once you’ve signed the loan agreement online, the funds will usually be paid to the seller of the vehicle within 24 hours. Then the purchase can be finalised, and you can be on your way.

Can You Get Pre-Approved With Less Than Perfect Credit?

Some people worry that they won’t be able to get a loan if their credit isn’t great. A low credit score doesn’t automatically rule you out, though, and every application is different. Some lenders are willing to look beyond the score and assess your income and the overall affordability of any loan. We can’t guarantee that you’ll get a loan approved, but we can talk to you about your options. We work with a range of lenders so we can help you work out whether there’s an option to fit your needs.

A loan pre-approval allows you to shop for your new electric vehicle with a clear budget, and gives you a strong hand with any negotiations, because you’re ready to act. If you’d like to talk about how this may work for you, get in touch with our team.

FAQs

Can you get a loan for an electric car in NZ?

Yes, you can. There are a number of options for finance, and we can help you find one that is appropriate for your circumstances.

What is the interest rate for EV loans in NZ?

It varies. Home loan customers may be offered low- or no-interest options if they meet their lender’s criteria. People who do not want to take that route, or do not own a home, may choose to take out a personal loan. The loans for these vary according to the borrower’s circumstances but may range from 9.95 percent through to 29.95 precent.

Do electric cars pay road user charges now?

Yes, electric vehicles pay road user charges of $76 per 1000km.

Do I need a deposit for an EV loan?

You may not. We can help you to look at your options.

How long does pre-approval take, and how long is it valid?

You may be surprised how quickly you can get an answer on a pre-approval application. It’s sometimes possible within a day or two. The pre-approval is usually valid for a set period of time, which is often a month or two.

Can I finance a used electric car?

Yes, you can. The lender may have questions about the age and condition of the vehicle and its battery health.

Does getting pre-approved affect my credit score?

Making a lot of applications can. We can help you target your application from pre-approval to the lender that is likely to be most suitable.

What do I need to apply for an EV loan pre-approval?

You’ll need proof of your income, expenses and ID. We can help you make sure you have everything in order.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current developments or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.