Owning a car is a big responsibility, especially if it’s your first time having one under your name.
Beyond having to familiarise yourself with the various interior systems of the new rig, you’ll also have to deal with the financial aspect of car ownership. And, as you’re likely well aware, buying a car isn’t cheap.
While there are modern cars that have reasonable price tags, some vehicles cost a bit more to finance due to their brand. Classic brands, for instance, can be incredibly costly nowadays as their supply is often limited and exclusive.
Of course, depending on the features and add-ons your dream car may have, it’s more than possible for modern vehicles to be pricey too. In any case, there will always be a percentage of individuals who can’t afford the upfront price of a vehicle and will need to look for alternative means to finance it.
If you fit the bill and are struggling to gather enough finances for your next scheduled car purchase, then you’re in the right place. This comprehensive guide will help you along your journey to financing your first vehicle, whether it’s an iconic classic like a Mustang or a newer model meant for daily use.
Making Your Decision: Deciding Between a Classic or Modern Vehicle
Your selection will play an important role in not only affecting how much you’ll spend, but also the types of loans available to you by lending companies and other financial institutions.
For instance, if you want to pick a classic vehicle, then you’re at liberty to do so if you have the funds for it. That said, just expect this category of vehicles to be more expensive and difficult to maintain and insure due to their novelty and age.
Naturally, this detail will be noted by lenders, and they may derisk their loan offering by requiring you to pay a high interest rate or securing your loan with collateral.
On the other hand, picking a modern vehicle grants you access to a wider breadth of loaning options. Many modern vehicles are built with sustainability in mind, featuring things such as improved fuel efficiency, automated safety features, and warranty coverage.
Most importantly, these cars are also manufactured and sold for a general automobile audience, so there’s more than enough supply to go around. This makes modern vehicles easier to value and finance, which lenders see as less risky.
And due to this lower perceived risk, borrowers have access to a wider range of deals as competition among lenders remains high. They may receive more flexible loan terms, lower interest rates, and faster approvals.
Does that make modern vehicles the premier choice? Not always. If you’re a collector who wants to own a classic car to fuel your hobby, then there’s no shame in choosing what you love.
Just be sure you’re well-informed and financially prepared for what comes with it. A car, whether classic or modern, is a commitment. It should fit your lifestyle, budget, and future plans. If you’re struggling with finding lenders that fit with your lifestyle or goals, consider Azora’s loan options to finance your new vehicle. Their options range from standard car loans to bad credit financial assistance, picking something that suits you should be at the forefront of your decision making process.
The following sections will highlight a few tips on how to access financing for your next car purchase.
7 Car Financing Options
While financing options fundamentally work to give you money, there are slight nuances among them that distinguish each type.
It’s best to know these differences to ensure that you’re picking the right one for your circumstances. Here are some of the most popular car financing options that you can access when buying your first car in Australia.
1. Secured Car Loan
One of the most popular financing options for car buyers is a secured car loan.
This loan type grants you access to a loan on the condition that if you fail to hold up your side of the loan agreement (that is, fail to pay the loan on time), then the lender has the legal right to repossess the collateral you signed for the agreement.
Secured loans are widely available for modern vehicles across banks and lending companies, and the loan amount is often limited to the car’s value with a little interest hike.
This makes it a good option for buyers looking for more affordable repayments and who believe that they can maintain consistent payments.
2. Unsecured Car Loan
Contrary to a secured car loan, an unsecured car loan grants borrowers access to funds without the need to provide collateral. The drawback is that these loans typically come with a higher interest rate than secured car loans.
That said, if you don’t have an asset to use as collateral, then this option may be the best one to pick if you have a consistent stream of income and a good credit score. Defaulting on this particular car loan can lead to court action or a negative impact on your credit score - so be sure to pick this only if you’re sure you can pay.
3. Speciality Classic Car Loans
Several speciality car loan providers allow borrowers to get a loan specifically for a classic car purchase. Choosing this type of loan is strategic as its purpose is closely aligned with the nature of the purchase, making approval more likely.
Furthermore, there are several loans that can be arranged according to the borrower’s needs. Some providers offer flexible terms, whereas others may not even require a down payment.
That said, the cons for this type of loan are that it may be the only loan agreement available for your specific purchase, which can force you to agree on less-than-ideal rates since you have no other choice.
In any case, if you’re buying a classic car as a long-term investment or a part of your initial classic car collection, this type of loan provides a structured and feasible path to ownership that can be worthwhile.
4. Novated Lease
A novated lease is a lease agreement that involves an employee, an employer, and a lender. The employee is the beneficiary in this arrangement, and companies that allow this arrangement can help employees reduce car costs while securing a vehicle.
How it works: employees select the car and their employer agrees to make the lease payments on their behalf using a portion of their pre-tax salary. This arrangement is beneficial because it can reduce the employee’s taxable income while giving them access to a car without an upfront cost.
Most novated leases bundle in running expenses like registration, fuel, servicing, and insurance. The downside of this agreement is that it’s tied to the employer; the lease may become your responsibility unless your new employer agrees to take it on.
5. Chattel Mortgage
If your classic or modern vehicle will be used for business purposes, then you can claim a chattel mortgage for your next car purchase. This financing agreement allows businesses to purchase a car using the borrowed funds.
The benefit of this financing agreement is that it allows the business to claim GST, depreciation, and interest as tax deductions. The business owner also gets complete ownership of the car from the start, with no usage restrictions.
6. Hire Purchase
Another car financing option under the umbrella term “secured loan” is a hire purchase. The lender, in this arrangement, buys the car on your behalf, and you’re expected to pay fixed monthly repayments along with fixed interest until the end of the period.
This scheme works similarly to a standard lease, but the difference is that ownership is transferred to you at the end of the term once the final payment is made. It’s ideal for car owners who want long-term ownership with low upfront costs, as you’re not expected to make any down payments.
7. Dealership Financing
Buying from a car dealership? If so, the dealership can potentially play a big role in affecting the type of financing you can get.
Many dealerships offer in-house financing that buyers can access to streamline the process. This makes things a lot more convenient for the buyer, as you can select your vehicle and secure your financing all in one place.
Dealers may also offer promotions like cashbacks or discounts for first-time buyers. But be sure to carefully review the contract before signing any lending arrangement. The convenience of dealership financing often comes at a price, such as higher interest rates.
Furthermore, finding a dealership that offers lending agreements for classic cars can be a challenge due to the rarity of the vehicle.
In any case, we hope we’ve given you enough insights on the various car financing programms you can consider for your next vehicle purchase.
Add the Finishing Touch Once You Receive Your Vehicle
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