Is it Worth Getting a Car Loan?
Deciding on whether or not to get a car loan is a tough call. Ultimately, the decision is a personal one, based on your individual circumstances.
In this article, we list four thought processes that some borrowers have followed when deciding.
1. Use savings for something that increases in value.
Many people save money to pay for something big and expensive, holidays, houses, weddings and, of course, cars.
More often than not, cars depreciate in value. This means someone who saves money over time and uses it to buy a car often sees their investment lose value. A car bought for $20,000 today might be worth $19,750 next month and $19,500 the month after and so on, for example.
Of course, there are exceptions like classic or rare cars that might go up in value.
Some people decide to put their savings into investments like stocks and bonds or even cryptocurrency instead of a car.
Every investment comes with some risk, but many report that the likelihood of seeing increases in stocks and bonds is much higher than seeing a car rise in value.
That means taking out a loan to buy a car and putting savings (which might have gone to a car) into other investments.
But you’ll have to pay fees and interest on the car loan.
If investments increase in value, that profit can, in most cases, more than cover any fees and interest incurred on a car loan.
As an added bonus, if a borrower services a car loan without missing any repayments, they’ll typically have a stronger credit report (credit file). This can mean increased chances of approval for possibly higher loan amounts when they apply for credit in the future.
Food for thought
Some quick calculations show the rough value of certain investments over time based on $20,000 investments.
... Yep, if only we had a time machine!
*Vehicle values are based on mid-range trim levels, no damage, average mileage and servicing.
**Share / cryptocurrency prices are rough figures
2. Emergency fund / future fund
Other people prefer simply holding onto their savings. Life can throw some pretty unpredictable events sometimes, COVID has taught us all that.
Having a healthy savings account can act as peace of mind for some people. They might find that keeping funds for emergencies or a future event is worth the cost of taking out a separate car loan to purchase a vehicle.
Without having savings tied up in a car or other investment, those funds are free to use should a situation call for it.
Furthermore, all vehicles purchased through finance are comprehensively insured but those bought with cash don’t have to be. This may be a factor to consider too.
3. Safety features
One of the biggest reasons why many people take out car loans is the ability to purchase late-model vehicles. Newer cars have more modern safety features and driver assist technology which translates into safer, more reliable vehicles.
Some people find knowing that they’ve got many years of safe motoring ahead is worth the costs of a car loan. Know the signs you may need a new car.
Below are a few of the latest developments in car technology
360-degree (overhead) cameras
These work by stitching together different camera views around the car. The display appears as if a drone is hovering over and around a car and some even work with augmented reality making parking a cinch.
They make navigating kerbs and objects in tight spaces much easier.
Blind-spot video feeds
It can be tough to see a vehicle’s blind spots, especially on busy roads. Blind-spot video feeds display a live video (similar to a reverse camera) in the gauge cluster, kind of like extra side mirrors.
This system takes autonomous emergency braking to a whole new level. It scans the sides of a vehicle at intersections to detect any approaching objects like other vehicles, pedestrians or cyclists.
The driver is warned if the system detects a possible collision.
These are designed to provide cushioning between the two front-seat occupants in a rollover or heavy side impact. They deploy from the side of the driver’s seat.
Centre airbags can minimise neck and spine injuries.
4. Work routine
Some people see buying a car as an investment in their lives whether on finance or not. For example, if someone relies on public transport, they may find a car allows them to travel further for employment.
A car also allows people to travel to more remote locations while carrying more equipment and at times of their choosing. This can often lead to more employment opportunities.
For example, instead of catching a bus into a city centre for work, someone might find better employment conditions in another suburb or town.
These factors can easily outweigh the costs of owning a car.
As an added bonus, a car opens up a lot more opportunities for weekend activities too.
At the end of the day
Taking out a car loan is a decision that changes with individual circumstances. Take time to crunch your numbers and weigh everything up.
If you’d like a no-obligation car loan quote based on your circumstances, give the Positive team a shout. Quotes often help borrowers make an accurate decision so they can choose the path that’s best for them.
Note that this is not financial advice. All financial decisions should be made based on your personal circumstances with the help of professional advice.
Positive Lending Solutions or the Positive Group is not a financial adviser. Consider seeking independent legal, financial, taxation or other advice to check how the website information relates to your unique circumstances.