There are more than a few choices to consider when weighing up how to finance your new set of wheels. Most people won’t have the cash outright so there’s plenty to think about when it comes to car finance, including your credit history, interest rates, and whether you should own the car outright or lease a vehicle. If you’re in the market for a new ride, here’s everything you need to know about finance options for your car.
Most people looking at purchasing a car will likely take out a loan. The options are either a secured or unsecured loans. If you were to default on a secured loan the asset (car) can be taken as security. A car loan that is unsecured may have a higher rate of interest to compensate for the lender having less security. Depending on the company you take the loan through, different criteria will apply, with different levels of flexibility. Many car loan companies like Zoom Car Loans , for example, offer loans with no deposit needed.
Personal loans are taken out directly from a financial institution, and theoretically can be used for any number of big purchases, which may or may not include a car. Some of the benefits of a personal loan over a car loan include the flexibility to resell the vehicle before the loan has been paid in its entirety, since most personal loans are unsecured. Personal loans are usually available in varying amount of between $1000 to $10,000, depending on the lender, and can be taken out with either a fixed or variable interest rate.
There are benefits for each type of rate depending on the current interest rate, and whether or not it is expected to fall or rise. Because personal loans are generally unsecured, they are also beneficial for those wishing to buy a used car, without having to use the value of the car as collateral against the loan. The trade off for this flexibility is generally a higher interest rate.
Car Dealer Finance
For the sake of convenience, many people take out a loan directly with the dealership where they’ve purchased the new or second hand car. Often however, it may not be the best deal, and could include additional fees such as loan insurance for the dealer, as well as other fees and commissions. It’s always a good idea to explore your options.
Credit Card and Home Loan Redraw
While it might seem impulsive, buying a car on a credit card may not be as bad as it sounds. If you’ve got a credit card with a favourable interest rate, i.e. less than 13 per cent per annum, and plenty of available credit, buying a car with your credit card may be both convenient and practical. It can make sense especially if you only need to borrow a certain amount, which may be lower than a lender’s minimum.
Another way to finance a new car could be with your home loan’s redraw facility (usually only available on variable loans.) As long as there is enough equity in the home, the benefits of this option include a much lower interest rate than a personal loan.
Have you taken out finance for a new or used car? What option did you go with? Share your experiences below!