When buying a new or used car there are generally two methods to pay – cash or financing.  Paying in cash means that you have the money upfront and can pay to own the car immediately, while car financing involves getting a loan to service the cost of the vehicle.

It is said that Cash is King and financing a car will cost you more than to pay with cash.  However, there are times when you may not have the cash to cover the car you want.  This is where car finance comes in.  There are also other scenarios where you may be better off using a car loan to finance your car purchase, rather than using cash.


Use finance to get a new/better car

Suppose you have saved $10,000 toward a used car.  Finding a used car can be a time consuming and stressful process, especially if you are worried for the safety of your family and need your car to remain reliable over many years.

If this is you, investing in a new car might be a better option for you.  However, you need more cash to cover the cost of the car.

What options are available to you?

You could wait until you have saved up enough to pay cash for a new car, but often when we need a car we need it sooner.  That’s where car finance comes in.

Car finance allows people who may not have access to enough funds to pay for a car to get a car when they need it.  Borrowing $10,000 to $20,000 on top of the $10,000 you’ve saved will ensure that you can choose a reliable new car that will last a long time.  Further, in buying a new car you’re able to choose exactly the features you like and negotiate add-ons.


Use finance to invest cash at a better rate

If you have access to good investment rates or low interest rates (or both), and have saved $15,000 toward your next car, you could find it better to finance your new car at the low rate and invest that $15,000.  This effectively will subsidise the cost of the car.

Top tip: in order to access low interest rates for your car loan, consider a secured loan.  By offering your car as an asset underlying your loan, you reduce the risk to the lender and may be able to access better rates and more credit.  Find out more about the difference between unsecured and secured loans here.


Car related expenses

Owning a car is expensive.  After insurance, registration costs, servicing and never-ending fuel requirements, it’s exceedingly frustrating when something goes wrong.  Especially if you have a tight budget.  So should you suddenly need replacement car parts or you realise your tyres are bald and need to be replaced urgently, this can throw off your finances entirely.  Or, you could take out a short term loan and repay the urgent car expenses over a few months.

Fair Go Finance has a range of car loans as well as loans for car related expenses, be it for insurance, rego, servicing, replacing parts, cost of a hire car while waiting for vehicle repairs, etc.  No matter the need, we have loans to fit your purpose.

Need a personal loan for car expenses or even a car loan?  Unsure how it works?  For more information click here, or get in contact with us on 1300 FAIR GO or through our Live Chat!

secondhand car yard in braddon october 2016

By Nick-D (Own work) [CC BY-SA 3.0 (https://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons

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It can be expensive to borrow small amounts of money and borrowing may not solve your money problems.

Check your options before you borrow:
For more information about other options for managing bills and debts, ring 1800 007 007 from anywhere in Australia to talk to a free and independent financial counsellor.

Talk to your electricity, gas, phone or water provider to see if you can work out a payment plan.
If you are on government benefits, ask if you can receive an advance from Centrelink.

The Australian Government’s MoneySmart Website shows you how small amount loans work and suggests other options that may help you.

* This statement is an Australian Government requirement under the National Consumer Credit Protection Act 2009.