What’s the Best Way to Pay for a Car in Australia?
Buying a car is a big decision. Once you’ve found your dream vehicle, you’ll quickly start to think about the best way to finance a car. Luckily, there are many different options within Australia to help you pay for the vehicle that you want in a time frame that suits you.
Around one in five cars in Australia are purchased with a car loan, and there are different types to suit individual circumstances. Australians borrow billions of dollars each year to buy cars so it’s really good to understand the options available to you.
Choosing the best way to pay for a car
The best way to finance a car in Australia can sometimes depend on the type of car that you are buying. It’s important to decide whether you want to buy a new or a used car. Car loans are available for both new and used cars, although the lender you choose may vary accordingly.
You’ll also need to sit down and do some calculations. Budgeting in advance is essential when deciding the best way to pay for a car. It means you’ll know exactly what you can afford, how much you can set aside for monthly repayments, and allow you to avoid missing payments or defaulting on the loan.
Decide how much you can realistically offer as an upfront payment—do you have any available cash? If so, this could help you get lower interest rates on the loan. But don’t put all of your savings into buying a new car, make sure that you budget properly and always have a safety net to fall back on.
What to avoid
The most important thing is that you don't put yourself in a position where you can’t pay back a loan that you have taken out. Missing payments and defaulting on your loan could seriously affect your credit rating and your chances of future borrowing. Only borrow what you can afford to pay back.
We can talk you through your options for financing a new car but we will generally advise against taking the following routes:
Using your mortgage to pay for your car
This may seem like the perfect solution but it could in fact add thousands of dollars to your home loan from additional interest in the long-term. Mortgages are designed to be paid off over a long period of time whereas most car loans are a maximum of five years.
Using credit cards
Many credit card providers will make it easy for you to purchase a relatively cheap used car simply by using your credit card. Credit limits are rising and this can be a tempting option. However, you need to be aware of the high interest rates you may be paying with these credit cards and the fact that you will have maxed out a credit card immediately and may then be in a position of not being able to use it until you have paid for the car in full.
Asking family or friends
This is a common mistake people make when considering the best way to pay for a car – especially when parents or grandparents have more disposable cash. Sadly, it rarely works out without at least a few complications so think very carefully before potentially jeopardising a close relationship.
Forgetting to research
We understand that you want to get on the road as quickly as possible, but it’s really important that you research options carefully. If you are pressed for time, speak to us so we can guide you through the options available, and prevent you from signing up to something that won’t be right for you.
How to tell if you’ve got the best deal
Generally, this will become clear over time. Circumstances change and all you can do is seek expert advice and make the best decision with the information available to you.
At Positive Lending Solutions, we have decades of experience, so we can help you when deciding what’s the best way to finance a car for you. We also have access to a wide range of lenders who will each offer different lending solutions – so we can ensure we find the right match for you.
Always consider your current situation, budget realistically and then look forward to getting out on the road! Let us help you find the best way to finance a car.