4 Questions to Help Decide If a Car Loan is Worth It
Are car loans worth it?
If you’re thinking of buying a car, the chances you’re thinking about car financing is high. If you haven't tried financing a car before, you might be wondering if car loans are worth it. While it’s possible to buy a car outright, most people may not have the available funds. Some who do still wisely choose to go for a car loan instead.
More information on car financing:
So, how can you tell whether financing a car is worth it? Well, there are a few things you need to weigh up, including how much you’ll use the car, whether you have a regular income or the cash you have available in your monthly budget after all expenses are paid.
Before you apply for a car loan and get too excited, here are a few questions you may need to answer first to know if it is right for you.
1. Who does car financing suit?
Financing a car can be worth it for people in certain situations. Generally, there are many people who can afford to have a car but won’t buy it outright.
If you are looking to own a car that you can use on a daily basis and you have a full-time job with a regular salary and a good credit history, choosing car financing will be right for you. Car financing is the best way to get you on the road but you don’t have thousands of dollars to spare right now to pay for the car outright.
By getting a car loan that you know you’ll be able to pay back, you can get and use the car that you want and make monthly repayments over a number of years. Financing a car can also help you maintain your savings and have emergency funds in case something happens in the future.
2. How can car financing help you in the long term?
Car financing can help to free up money that you would otherwise be investing in the outright purchase of a car. By only paying back monthly instalments rather than one bulk sum, you’ll be able to budget appropriately and have a far better cash flow. This can allow you to invest in other areas of your life and avoids putting you under financial stress.
Paying back a car loan with no defaults or missed payments will be noted on your credit record and can help improve your credit score in the future.
Depending on your individual car loan, you may not have the full responsibility for expenses such as repairs and maintenance like you would with a car that you have bought outright. You might also get the opportunity to upgrade your vehicle before the loan term has finished, which means you could avoid having an older model that could sell for a low price.
3. How can you get the best car loan?
It’s highly likely you’re going to need a bit of help to get the best car loan for you. We understand that it can be an overwhelming task to be faced with and we want to help you to find the car loan that makes car financing worth it for you.
There are a couple of things to consider when you are deciding whether car financing is worth it and if so, which car loan is right for you. Have a think about some of the following points:
Low interest rates
Generally, if you can offer a good deposit on your car and want to take out a long term loan, you could benefit from low interest rates. We’ll help you calculate whether this will save you money in the long term.
You need to consider how quickly you can pay off your loan. Short term loans often come with higher fees, but you’ll also own the car sooner and this could suit you. You can get a quick quote here to get an idea of how much your monthly repayments will look like and which loan term works best for you.
We need to know as much as possible about your credit history. If you have a poor credit score, you could struggle to find a low interest rate as lenders may see you as a higher risk to lend to. Get a free credit check to know where you stand and how your chances of getting approved for a car loan looks like.
4. What are the risks of car financing?
It’s fair to say that there are two sides to car financing and for some people, they may think that it's simply not worth it. And this could be for a number of reasons including:
- Paying more in car financing than the value of the car at the end of the loan term. This sounds about right because you need to add in a couple of costs like interest rates and other fees. However, thousands of Australians still choose to go with a car loan even if they could afford to make a cash payment. Because they'd rather not make a large payment to purchase a new car right off the bat and save their cash for when it's really needed.
- Warranties can expire before the end of the loan term leaving you with costs. This is a real risk, however, you can always trade in your old car for a new one, and receive a new warranty on it. This way you will always stay covered in the event of a breakdown that's generally covered under warranty.
- You may not have full ownership of the car for the duration of the loan term. If you've chosen a secured car loan, the lender will register their interest in the vehicle on the Personal Property Security Register (PPSR). But, if you're able to make monthly repayments until the end of the loan term, this shouldn't be a problem for you. However, secured loans generally give you access to a cheaper interest rate. Once the loan has been paid off, you will own the car completely.
There are a lot of rules and regulations that you need to be aware of when applying for a car loan to make sure that you're receiving the best deal possible and that you're making the best use of your hard earned money.
At Positive Lending Solutions, we always want people to be aware of the risks involved in car financing. We can answer your queries and help you make informed decisions about the right car loan for you. With our decades of experience working with a wide range of lenders, we’ll do everything we can to help you come to the right decision and then guide you through the car loan process with minimal stress.