One of the most popular ways to get a car is through car finance. With it, you can get the vehicle you need for your family without spending your entire savings on a single purchase. But before you send in an application, do you know how exactly how car finance works?
The process of acquiring a vehicle in Australia is generally through one of the many forms of car finance. Lenders will need to assess applicants based on their ability to make the required payments over the set period of time. There are different types of car finance in Australia. Here are some of the more popular options:
Car Lease
A car lease has fewer obstacles when it comes to approval. Although you are still subject to the same credit checks as a secured loan, these aren’t as extensive because ownership of the vehicle remains with the lender until the contract is discharged. This is also a good option for those with a less than stellar credit history. Additionally, a car lease allows you to plan out when you need to pay and how much for the next 3 to 5 years.
One advantage of a car lease is the options that come with it. You can either buy the car after the term is over or upgrade to a newer vehicle. It saves you the trouble of needing to sell the car yourself when the time comes. It remains as a popular option for a lot of Australians.
Secured car loan
When you get a secured car loan, the vehicle becomes the security for the loan and the lender can claim the vehicle if you fail to make payments.
An advantage of this is that the interest rates can be lower however, once you finish the car payments, you will own it outright. This can be a disadvantage if the vehicle depreciates over time and may make it difficult to sell – especially if it doesn’t suit your lifestyle. So, consider that when you look for ways to get a car for yourself.
Unsecured car loan
Compared to a secured car loan, interest for an unsecured car loan can be higher. That’s because lenders have no security over the asset. The process of applying for an unsecured car loan is similar to applying for a secured one. So, you will still need to prepare and have all the required documents in order.
When it comes to getting a car for yourself, it’s important to consider your financial standing. For those who are earning just enough, they can opt for a car lease. That way, a single payment can cover insurance, car payments, and registration.
Whichever car finance option in Australia you choose, make sure it fits your budget and will allow you to live comfortably within your means.
