Today we are talking about the best way to finance a car in Australia. This is very common for us to want to buy a new car. Because of many reasons, it is very hard to afford a new car. The general population uses use installments or contract installments where they can pay more than 12-60 months and get more discount on the price of the car.
To finance a car with leasing means you are paying a monthly fee and in return, you can use the car for a given period of time when leasing ends it returns to a dealer and you have the choice either to pay some extra money and continue using it or give back.
The most common scenario is that we take financing from a bank however there are other alternatives such as
What Is Dealership Financing?
Dealership financing is an arrangement between you and the dealership where they finance your loan for you. It works almost exactly like buying a car with traditional financing, except that the car dealership actually holds the title to the vehicle until it’s paid off.
The most common scenario is that people take this kind of loan because they cannot get bank loans or they think it is easier to get dealership finance. Since this loan will be offered directly by the dealer, they charge very high rates of interest (almost double what you can get with bank loans).
You should know that your credit history is very important in getting the best rates. If you have a high score, your interest rates will be lower.
Top 6 best ways to finance a car Australia
1. Car Loan
Bank loans are the most common option to finance a car. As we all know major bank in Australia is ANZ, Commonwealth Bank, National Australia Bank, and Westpac Banking Corporation. Each of them offers a wide range of loan packages to finance a car from AU$20 000 to AU$100 000.
The rates of interest are very high, there are some loans that may charge up to 18% which is very high. However, if you have a good credit score the rates will be lower.
To apply for a car loan here are the documents required
- Proof Of Income (2 latest payslips + your tax notice)
- Identification (driver’s license or passport)
- Residency (utility bill like gas, electricity or phone bill)
2. Personal Loan
This is another option where you do not need to go through the strict process like a car loan, it’s pretty simple. To get a personal loan all you need to do is have proof of income and evidence of residency and apply instantly online.
3. Hire Purchase
Hire purchase, commonly referred to as a personal contract plan, is where you pay a deposit and then make monthly payments towards owning the car outright. You need to do this with a guaranteed future value (GFV) which means that at the end of the hire period you will have the option to pay additional money and own the car or return it. The GFV is set by the dealer and typically ranges from 100% to 120% of the sticker price or vehicle’s valuation, whichever is lower. In other words, you pay a higher deposit in order to take advantage of a better GFV. also you can Car use the finance Australia calculator.
Hire purchase famously called as HP. Here are some advantages of hire purchase
Advantages of Hire Purchase –
- 1. Hassle-free process to finance a car
- 2. No need for a bank statement and tax certificate
- 3. Flexibility to pay within your means
- 4. Drive the car as you complete the first payment
- 5. You can own the car after the last payment is made
This option is good for those who want a luxurious ride without having a tough time with banks.
4. Lease Purchase
Lease-Purchase is a type of finance option in which you pay monthly payments and at the end of the contract period, you will be given an option to buy a car or renew your lease. However, if you do not want to continue with car at the end of the hire period the only choice you have is to buy it.
Advantages of Lease Purchase –
- 1. Good option for people who do not have a good credit score
- 2. No warranty or guarantee to own the car at the end of the hire period
- 3. Deals available on lease purchase are not as competitive as other options above so you should look for other options if you can get a better deal somewhere else
A lease purchase is best for people who do not have a good credit score.
5. Personal Loan from the non-major bank
A personal loan from nonmajor banks is available at lower interest rates which range from 9% to 13%. This option is suitable if you want to finance a car but don’t want to put your house online.
Advantages of Personal Loan –
- 1. Easy approval process, you can get funds in hand within an hour!
- 2. Low-interest rates which are perfect if you have a bad credit score or want to finance just the down payment of the car purchase
- 3. Flexible repayment duration up to 7 years
- 4. Fixed monthly repayments set within your affordability
Disadvantages of Personal Loan –
- 1. High-interest rates, which ranges from 18% to 30% on average
- 2. You can qualify for a personal loan only if you have a great credit score
- 3. Need to pay a Processing fee of around 2%-3% of the total loan amount
- A personal loan is good for people who have a bad credit score.
6. Home equity loan:
This is a type of loan that uses the equity you have in your home as collateral. The interest rates and loan terms will vary depending on your personal credit score and other factors. This option is not only suitable for people who has a bad credit score but also for those who want to get rid of high-interest rate loans such as payday advance, payday loans, etc.
Advantages of Home Equity Loan –
- 1. Low-interest rates, which are usually better than personal loans with an APR starting at less than 10%
- 2. Ability to finance a higher amount in one loan when compared to other options
- 3. Fixed monthly repayments set within your affordability
- 4. Personal Loan is good for people who have a bad credit score
- 5. Need not pay Processing fee of around 2%-3% of the total loan amount
change the face value of your home with low-interest rates to get money from the bank and can use that money for anything
A car is an expensive asset that needs to be paid for over a long period of time. The best type of finance option would be a personal loan if you have a great credit score, hire purchase otherwise, and the second option is to pay monthly plan of nonmajor banks.
FAQs: Best Way To Finance a Car Australia
Ans: Hire purchase is a type of finance option in which you pay monthly payments and at the end of the contract period, you will be given an option to buy a car or renew your lease. However, if you do not want to continue with a car at the end of the hire period the only choice you have is to buy it.
Ans: Personal loan is the best way to finance a car. It can be a great deal if you have a good credit score, but it is expensive if you have a bad credit score.
Ans: Annual percentage rates are the rate of interest at which you have to pay per year, they are normally quoted as X%.
Ans: This is a type of loan that uses the equity you have in your home as collateral. The interest rates and loan terms will vary depending on your personal credit score and other factors. This option is not only suitable for people who has a bad credit score but also for those who want to get rid of high-interest rate loans such as payday loan, payday loan, etc.
Ans: Personal loans from non-major banks can have the best rate in Australia, which is 9%-13%. This offers good rates to car buyers with the bad credit score.