Finding the perfect car often seems like a never-ending road trip. First you need to identify what type of car you want. Then you need to add a layer of responsibility and determine what type of car you need. And finally reality comes in to play as we decide what type of car we can afford.
When you finally find your next ride, the last thing you need is a thousand different opinions on the best way to pay for it.
So we’ve kept it simple. We’ve broken down the most commonly used auto-finance options, complete with pros and cons, so your decision is that much easier.
Personal (Car) Loan
Personal Loans are a great way to get behind the wheel. They usually come in one of two options – Secured or Unsecured. Secured means that the lender has rights over an asset should the borrower not meet their commitment, and these loans usually come with a lower rate. Unsecured Loans mean you don’t put up any collateral, so the interest rate is generally higher.
Getting approved for a Personal Loan in the past was seen to be a bit more of a drawn out process, but these days, depending on your lender, approval can be as quick as 24 hours.
Pros: straightforward, uncluttered, easy to budget for.
Cons: Depending on the lender, you can end up paying more interest than other options.
Perfect for: First time buyers or buyers without mortgages.
Home Loan Redraw
Most people with a Home Loan will know that it’s the cheapest form of money on the market. With home loan rates at historic lows, if you’re a prolific saver with a low mortgage interest rate, this is a bit of a no-brainer.
How does this sound? Draw another $25,000 on your Home Loan at a low interest rate, pay cash for your new vehicle, and drive out of the showroom? No muss, no fuss.
However, it’s important to consider the car-sized addition to your home loan, and to make adjustments to your repayments, so that you don’t end up paying the car off over the full course of your mortgage. By upping your repayments to include extra to cover your car, you’re able to pay your car off in the same 5-7 year period as a Personal Loan but at a much lower interest rate.
Pros: Relatively easy to arrange, lower interest rates.
Cons: Danger of turning a short term debt into a long-term one.
Perfect for: People who are able to make higher-than-required mortgage payments.
Most of us are wary of Dealer Finance, with stereotypical imagery of car dealers in tweed jackets, twirling their moustache dancing through our heads. Typically, we consider dealer finance untrustworthy and too expensive.
However, this isn’t always the case, and by striking at the right time, there are some potential bargains to be had.
Firstly, when considering Dealer Finance, be sure to consider the company behind the deal. Do you feel safe borrowing from them? Have the full terms and conditions been explained to you? Your gut feeling can be a good indicator here.
Also, since Dealer Finance is often based in commission, by visiting a dealership late in the day, on a weekend late in the month, you could cash in. your dealer may just want to head home, and your sale may mean the difference between them making commission for the month or not, so be prepared to negotiate for a better deal.
Pros: The convenience. You can drive away as soon as you’re approved.
Cons: Can be more expensive in the long run, due to higher fees and rates.
Perfect for: Canny negotiators who can sniff out a deal.
Regardless of which option you decide to go with, you’re going to need your CTP and Car Insurance sorted before driving your new ride off the lot, so if you want to make the process smoother, getting a quote online ahead of time can save you time. The Greater have partnered with Allianz to provide great value Car Insurance – get a quote online today. You can even save your quote and return to it later!
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