Questions to Consider When Looking at Car Finance Options

  • Posted 24 Jun

Questions to Consider When Looking at Car Finance Options

When buying a car, most people choose a new or recent model because they want the safety and reliability of a newer, low mileage car. But unless you are willing to buy a cheap cash car, you’ll need to consider financing options.

Car loans are a big commitment that you’ll pay for years, so it’s important to ask the right questions before making a decision.

The three important questions below can help you get the loan that best suits your needs.

1. How much should you borrow?

The most obvious question is how much you are willing to borrow. Dealerships and sales people count on you spending more because you’re excited by the beautiful new cars in the showroom. The smart move is to decide in advance how much you are willing to spend, and then stay firm on that number.

Some luxury dealers are now offering car loans that last six or seven years to make payments seem smaller, but don’t be fooled. A long-term loan over this time period will cost you thousands more in interest, and if you pay too little on a car you’ll be upside down on the loan, meaning you owe more than what the vehicle is worth.

If you feel tempted or pressured when shopping for a car, take a step back and remember the amount you decided on. Remind yourself why you don’t want to take on extra debt.

2. Should I lease or mortgage my vehicle?

Leasing is a way to lower your monthly payments by renting a car for a set time period, usually a few years, after which you’ll need to pay the rest of the amount owed. A chattel mortgage is a similar arrangement that offers tax benefits for business owners. An operating lease differs from a regular lease in that you aren’t required to buy the vehicle after the rental period is up.

In most cases, you’ll get the best car finance deal by purchasing rather than leasing, though this may be reversed if you are buying a car for business reasons. Your financial advisor can help you understand the complicated leasing tax benefits so you can make an informed decision.

3. When should you arrange financing?

Many dealerships offer in-house financing, but you’ll be better off if you prearrange financing from another lending institute instead. Before you start car shopping, research car loans and look for a good rate. A typical loan lasts two to five years; be wary of anything longer.

Sometimes dealerships run a no interest special or offer other financing incentives. These can be a good deal, but only if you have excellent credit. If you are pre-approved for financing, you can always ask if the dealership can do better. If the answer is no, you’ll be glad you worked out everything in advance.


Are you looking for a car loan? Want to be pre-approved before visiting the dealerships? Our car finance experts can help. Contact Australian Credit and Finance for your car and home loan needs.

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