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 are you’ll be thinking about car financing. You may also be wondering if car loans are worth it. While it’s possible to buy a car outright, most people don't have the available cash, and some who do still choose to go for a car loan instead.
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.
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 can’t buy one outright.
If you are in a full-time job, have a regular salary and a good credit history. You want to own a car to use on a daily basis however you don’t have thousands of dollars to spare right now to pay for the car outright. By getting a car loan which you know you’ll be able to pay back, you can benefit from the use of a car that you want, and pay back the price of it over a number of years in monthly repayments.
Financing a car can also help you
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 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 after the loan term has finished, which means you could avoid having an older model that sells 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.
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.
4. What are the risks of car financing?
It’s fair to say that there are two sides to car financing and some people feel that it simply isn’t worth it. 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. However, thousands of Australians still choose to go with a car loan even if they could afford to make a cash payment, only because they'd rather not make a large payment to purchase a new car right off the bat and save that 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 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).
- However, secured loans generally get 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 help you make informed decisions about the right car loan for you. We have decades of experience working with a wide range of lenders, so 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.
Get started with car loan options that suit you.