You work hard to put as much money in the bank as you can so when it comes time to make a large purchase such as investing in a new car—you have to determine if it is best to pay in cash or to finance. There are many contributing factors to this decision, the most pressing of which are answered below.
Will You Still Have Money Left Over?
If you are considering paying in cash, the cash reserve you take from should be the cash you are saving for a raining day—and not your house fund, emergency fund, or your kid’s dollarmite savings. That being said, the average Aussie can’t afford to pay in full and still have a nice cushion left in the bank. If you can afford to pay in full, you will save money on the interest you would have to pay over the term of your loan. However, you should still commit to saving or reinvesting a set amount each month to replenish the large sum you spend on your new car.
How Long Do You Plan On Keeping Your Car?
The average Aussie drives a car that is less than 10 years old, many less than 5 years. Sometimes this is because you prefer to drive a newer model, but also because there are fewer repairs required for newer cars. From a financial standpoint, you must consider if in 5 to 10 years you will be able to save enough to buy another new car. Yes, you will get a bit back when you trade it in, but this is often a small fraction of the buying price. If it’s not reasonable to save what you need for your next car in the time you plan on trading in your new car—financing may be the more cost-effective option.
How Much Can You Put Down?
The interest rate on a car loan is usually quite low, so if paying in cash is not an option—then you can still identify an affordable means of getting the reliable car you require. One way of helping to minimize your interest is to put as much down as comfortably possible in the form of a deposit. Even a few hundred dollars or trading in your current car can save you hundreds or more in the long run. If you can’t put much down, aim to minimise interest by making more than the minimum repayments, this will help you save interest and pay your car off faster. This doesn’t have to be a lump sum, and can be paid with an extra $20 or $50 here and there, but it can make a significant difference to how long it takes to pay off your car.
What Is Your Current Need for A Vehicle?
Another factor that you must take into consideration is your current need for a vehicle. The fact of the matter is, most adults require a car to get to and from work—and to safely transport their loved ones. Without a car, you may not be able to accept your dream job or your kids may not be able to participate in the extracurricular activities they desire. In other words, your car is often directly related to your income and quality of life—meaning that the expense of financing a reliable and safe vehicle is well worth every penny.
The Most Competitive Car Finance Options in Australia
If you are like the majority of adults who will choose to finance their next vehicle, it is important to know your options. You don’t have to go with your bank or lenders the dealer has partnered with, but you can seek out your own competitive financing. If you’re looking for the widest range of bank-beating vehicle or leisure finance options available in one location from over 40 of Australia’s most trusted financiers, speak to one of Loans For U’s expert consultants today on 1800 538 287 or get an instant, online quick quote now.
