September 26, 2018

How to compare car loans in Australia

If you can’t afford to buy a car outright, there are loans available that will allow you to purchase the vehicle of your choice. There are different types of loans and some are cheaper than others. Before making a financial commitment, it is essential that you compare car loans in Australia that are available to you, and select one that best suits your budget.

A standard car loan

A car loan is provided to purchase a new or used vehicle. Full insurance on the vehicle is mandatory since it is used as surety for the loan. Your monthly repayments will be based on your income, and it will be agreed over a certain period of time. Since the finance is secured against the car, you will have a low fixed or variable interest rate.

Commercial hire purchase

The car is purchased by the financer who then hires it to the consumer over an agreed period of time. When all payments have been made, ownership is transferred. With this type of car loan you can reduce the amount by making an initial deposit or trading in your old vehicle. Interest rates and repayments are fixed; the loan is easy to modify to suit the needs of the borrower. There is also no GST on repayments and the capital outlay is low.

Finance Lease

The car is purchased by the financer who then leases it to the motorist. The car is made immediately available with little or no capital outlay. A lease is available for businesses or individuals on the basis of a fixed monthly rental. The motorist is financially responsible for the full maintenance of the vehicle over the period of the lease. At the end of the lease, the motorist is given the option to return, refinance or purchase the vehicle.

Novated Lease

An arrangement made between your employer and the leasing agent on your behalf. Leasing payments are taken directly out of your wages but the vehicle is registered to the company that you work for. This type of payment is referred to as a novated deed. At the end of the lease, you are still given the option to buy the car.

Operating Lease

The vehicle is purchased by the financer and then rented to the motorist. Ownership of the car is retained by the financer. At the end of the loan agreement, the motorist has the choice whether to continue renting it or to upgrade the car to a newer vehicle.

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