If you have arrived here, we are sure that you want to finance a car. Stay until the end of the article and see how you can finance a new or used car and what are the financing methods available in the market.
Different ways to pay for or finance a new or used car include:
- Apply for a car loan
- Apply for a personal loan
- Hire Purchase Agreement
- Salary cut (renewal of lease)
- Reschedule Your Home Loan
- use your savings
Depending on the type of car you’re looking for, you may want to consider luxury car taxes, and you may be interested in the best-selling new cars in Australia right now. We also have a 5-step checklist if you’re looking to buy a used car.
What should I consider before buying a car?
Aside from buying a house, buying a car is one of the biggest purchases many of us make in our lives. So, how can you save money when buying a new or used car? While a good general rule of thumb is to avoid using debt to buy depreciable assets (such as motor vehicles), using financing is still the most common way Australians buy vehicles. Even if you have extra cash, it’s always a good idea to know your options, as there may be exceptions to this general rule for some people.
How long will it take to buy a car?
Depending on your personal financial situation, paying cash may be a good way to finance your car. According to Canstar research, Australians can take almost two years to save up to $25,000 for a new car if you want to buy a car with cash. The calculation is based on the average Australian full-time wage earner of $90,329 putting 20% of their monthly income into a bonus savings account for an average savings rate of 1.06%. We also assume that income tax and Medicare taxes will be levied on average annual income and savings account interest income at 2021-22 rates.
Is it worth giving up buying a car and opting for rent?
If you’re in the market for a new car, a pay cut for a refurbished car rental may be worth considering. But remember, when you rent a refurbished car, you don’t actually own the car – you’re just leasing it.
A car “waiver” involves a three-way agreement between you, your employer, and the financial company. Basically, you ask your employer if they would like to pay back the rent on the car with your pre-tax wages, and if the answer is yes, you can file a lease with the finance company. This company can be chosen by your employer, who is responsible for paying rent and fringe benefit tax (FBT) directly to the company.
ASIC’s Moneysmart says repaying your vehicle from your pre-tax wages can reduce your taxable income, which can lead to less tax you pay each year. The Australian Taxation Office (ATO) points out that GST does not apply to renewing leases in the same way as buying other types of cars, which means you may end up paying less for the car than you would buy it outright.
Refurbished car rentals can also have some disadvantages. For example, residual value may be owed at the end of the lease, higher interest rates and management fees may be charged, and you may be responsible for the car if you lose your job or change jobs.
Buying a car or personal loan to buy a car: is it a good idea?
As I mentioned before, it’s best not to use debt to buy depreciating assets like new cars. However, there may be benefits to buying a car with a car loan or personal loan. Borrowing money to buy a car gives you immediate access to the vehicle, which you may need. Regular car or personal loan repayments can also improve your credit score. This can be helpful if you plan to make a major purchase in the future, such as buying a home when you need a home loan. But missed repayments or multiple loan applications in a short period of time can negatively impact your credit score, so consider that risk too.
If you’re considering a car or personal loan, make sure to consider the Product Disclosure Statement (PDS) and Target Market Determination (TMD) before making your decision. You can contact the issuer of the product directly to obtain a copy of the PDS and TMD.
Should You Consider Dealer Financing?
If you’re looking to buy a car through a dealer, it’s handy to have your auto loan approval in your pocket when you walk into the store. It lets you focus on what you’re supposed to be doing there: picking a car and getting the best price for your purchase.
Dealer financing is a common new vehicle financing method, and dealers are obviously attractive as a “one-stop” convenience factor.
As a car buyer, being realistic is important. Car dealers have to make money somewhere – either through financing or the selling price of the car. Dealers can often lure new buyers with high rates, but those rates don’t necessarily apply to the car you’re eyeing. Relying on dealer financing can limit your ability to negotiate or buy a better price for a new wheel.
Additional fees are also a concern, which can increase the overall cost of the loan. Dealer financing can incur registration fees and dealer brokerage fees and can add up quickly, even into the thousands of dollars. Don’t be fooled into thinking that the cost of a loan ends up with a low interest rate.
It can sometimes be difficult to figure out all the details of a Dealer Financing offer until you’re with the dealer’s sales staff. Take the time to read the fine print and carefully compare all car financing options.
Green loans
Green loan is a type of credit based on the fact that the credit will be used to make environmentally friendly purchases, such as cars. B. Provide green products for your home or buy electric or hybrid vehicles. Some lenders may offer you a competitive electric vehicle (EV) rate on a green loan – in some cases it may be lower than what you would get with another vehicle – but it’s always worth it Read the fine print. You may find better deals elsewhere. You can compare car loans from various lenders in Canstar’s database and learn more about hybrid cars available in Australia.The best way to buy a car for your business
The best way to buy a car for your business may vary depending on your business and personal circumstances. There are tax benefits to buying a car for your business, if you need to use Temporary Full Cost Accounting (TFE) to buy a motor vehicle such as a Ute, van or most cars, the maximum deduction under the ATO is 60,733 USD FY 2021/22. Canstar has a separate article on instant tax write-offs if you want to learn more.
If after reading this content, you feel confident in buying a car, go ahead and get the dreamed new car.