More Aussies are falling behind on car loans

The number of Australians failing to keep up with their car loans will continue to rise, with those living in mining centres most likely to fall behind on their payments.

A November report by Moody's Investor Services found the average 30-day or more delinquency rate increased 1.18% in the year to September 30.

"We expect delinquencies and defaults to increase moderately through the remainder of 2016 and in 2017, in particular in regions exposed to the slowdown in the mining sector," says Alena Chen, Moody's vice-president and senior analyst.

New-car sales in Western Australia have declined by more than 10% in the past two years.

Roy Morgan research released last week showed the number of Australians intending to buy a new car within the next 12 months has fallen since the start of the year.

Scott Malcolm, a financial adviser and director of the online platform Money Mechanics, says that while a car purchase is exciting, buyers should take steps to protect their finances.

"There is plenty of jargon around when it comes to the finance options for cars," he told Money.

"It is important that you understand the terms of the contract you are getting yourself into. Is it a personal loan, hire purchase or lease agreement?"

Malcolm also encourages buyers to shop around for the best loan, negotiate on prices and consider the tax implications of the purchase.

Scott Malcolm's tips to avoid getting in over your head with car loans

• Understand your cash flow to ensure you can afford the repayments. Consider salary packaging, which could provide tax benefits and balance out the running costs over time.

• Download the MoneySmart cars app, put together by the Australian Securities and Investments Commission, with tips for buying a vehicle and traps to avoid.

• Take your time with the process. Don't get caught up in the excitement of the sales experience.

• Shop around for the right loan and get the best deal on interest rates. Check the "comparison rate" against those of other providers, and remember you can negotiate.

• Understand the type of loan you are getting into, including fees and "balloon payments" at the end of the term.

• Delay the purchase so you can pay cash, or save a larger deposit so can borrow less.

• Seek further advice and start your journey to financial freedom and creating wealth with deeper understanding.

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