Will you benefit from taking out a car loan?
It’s worth thinking about because buying a car isn’t something you do every day.
It’s a big investment, and depending on your financial circumstances, you have two options: Pay with a large sum of cash upfront or take out a vehicle loan.
If you’re looking at car finance options, you’ll be pleased to know that car loans come with many advantages which we’ll outline below!
Borrow 100% Of The Car’s Purchase Price
This is amazing if you need a car urgently since you don’t have to wait until you have saved up the whole amount or part of the money.
Car finance is a good option if the monthly car loan repayments are manageable for you.
You can also reduce the price of your monthly repayments by extending the duration of the loan (but keep in mind that you will end up paying more over the life of the loan due to higher interest rates.).
That new car you’ve been eyeing could be yours within the short time it takes the dealer to prepare the vehicle and complete the admin involved.
Free Up Your Cash Flow
If you are running a business, or have a house to feed, paying a lump sum of money upfront could make life difficult for you.
Having cash flow is important for you to maintain liquidity, and be able to pay for important things like unexpected business expenses and emergency medical bills.
This is why a car loan might be a better option for you. You can spread out your vehicle costs over a few years while still enjoying the benefits of having a car and sufficient cash flow.
Benefit From Tax-Deductible Car Finance
If you are a business owner, you can benefit from work-related tax deductions.
You will be eligible to claim interest on the car loan, insurance premiums, repairs, servicing, and other vehicle expenses.
You could also be eligible for the Australian Federal Government’s instant asset write-off scheme.
This applies to both new and used equipment under $150 000, allowing you to claim an instant deduction for business purposes.
Improve Your Credit Rating
Another great benefit of car loans is that they allow you to improve your credit score so that it’s easier to apply for a mortgage, a personal loan, or a business loan in the future.
By consistently paying your monthly finance repayment on time, you can establish a good track record.
You are proving to the lender that you are low-risk and this could also mean that you get better interest rates for future loans.
With comprehensive credit reporting that has recently been rolled out in Australia, it allows financial institutions to see how well you manage debt by looking at your positive credit behavior.
For example, a lender can check your repayment history, and your previous successfully paid loans, whereas in the past they could only see your ‘bad’ credit behavior.
Young people with little to no credit record, and those with a damaged credit history will find this especially helpful.
Choose From More Vehicles
When you have a limited amount of money to spend on buying a new car, it often limits your vehicle options.
You might be set on purchasing a second-hand vehicle since it’s the only suitable option available in your price range, and to avoid taking out a loan.
It may seem like the most budget-friendly option, but a used vehicle often comes with hidden costs.
Most people end up spending a lot of money on expensive car repairs, more frequent services, and breakdowns.
Is buying a used car really going to save you money in the long run? This is important to think about.
Car loans allow you to buy a new or more expensive car that is not as likely to cost you as much money in repairs and maintenance down the line.
Newer cars, specifically electric vehicles, also tend to be more fuel-efficient, which is another excellent advantage.
Not to mention that you could qualify for a lower interest rate by driving a ‘green’ car.
Buying your dream car is very exciting, and it’s in your best interest to compare car loans and find the best one to fit your financial situation.
Look at the interest rate, loan term, monthly payments, additional fees, and terms and conditions of different types of loans offered by various brokers.