When it comes to getting your first car chances are you haven’t saved all the cash so,therefore, you’ll naturally have to look into financing options to get your dream car. When it comes to getting your dream car there are plenty of options out there with advantages and disadvantages.
Below are some of the most common financing options for vehicles in Australia
Personal Loan (Financial Institutions)
This is the most common option that many people opt for when getting a new car. Many usually compare this with leasing and claim that the latter is better but what many don’t realize is that it is true only in the short run. Even though loan payments are higher than lease payments (this again depends on your car), when you consider the long run getting a loan is cheaper.
There are two types of loans, secured and unsecured and this further breaks down into a new or used vehicle. Unsecured loans have quite a high interest rate and you also need to have high credit scores. The advantages of getting a loan is that it includes on-road costs, the monthly payments are fixed, a secured loan with have low interest rates and you can be flexible with the terms before locking in.
If you are considering a personal loan, there are plenty of loan calculators online. No matter the type of vehicle whether it’s a car or truck loan calculator will help you do your homework before approaching lenders.
Financing Lease
After loans many owners opt for this option. What happens here is that the lender will buy the car and the “leases” it to you. You can directly start using the car without making a big down payment. Just like a loan you will have to pay monthly fixed payments but rather that the cost of the car the payments are calculated on the depreciation of the car.
Another advantage is that at the end of the lease period you can just hand over the keys and start a new lease, sell, or buy the car after paying the residual cost.
The advantages of this type of finance options are that the repayments are usually tax deductible and it is cheaper in the short run but can cost you more when you look at the bigger picture.
Novated Lease
This is similar to a lease but is a three-way arrangement between the employer, employee and dealer. The employer leases the car from the dealer and hands it over to the employee and each month the payment is sent directly to the dealer from the employer and it is deducted from the employee’s pay.
This is advantageous because the payment is made from the pre-tax income from the employee’s side and from the employer’s side this can be an interesting way to add benefits to a remuneration package.
These are three of the most common financing options used in Australia to buy a new car. In the end the choice depends on your budget and cash flow.