5 ways to finance your new car

In the market for a new car? Weighing up your options when it comes to car finance can be a little daunting. Should you save up to buy your car outright, borrow funds or opt for finance through a car dealership? 

Take a look at our quick guide to common car finance options before you decide what’s best for you:

Pay cash up front

Paying cash upfront for a new car can be a good option if you’ve already got a lump sum saved up, or you’re a good saver and you know you’ll be able to pull together the funds in the time frame you need to buy your car.

When you pay cash upfront to buy a car, it’s all yours - no debt worries or loan repayments for years to come, plus, because you won’t be paying interest on any borrowings, you’ll pay less for your car overall.

Top tip:

• Make sure you have enough savings left over to cover unexpected expenses like car repairs or other emergencies.

Unsecured vs secured loans

Unsecured loans are loans that don’t require you to secure an asset like your home or car to take out your loan. Because the lender carries a higher level of risk, interest rates tend to be higher and you’ll also need to provide more evidence of your ability to service a loan such as a good credit history, secure employment and sufficient income.

Unlike an unsecured loan, with a secured loan you need to provide an asset, like your vehicle, as security against your loan. Because there’s an asset tied to the loan, secured loans usually offer lower interest rates, but it’s important to remember, if you were to ever default on your loan, your lender could use your secured asset to recoup their loan costs.

Fixed vs variable rate loans

If you’re looking for the certainty of a locked-in interest rate and repayments that stay the same, a fixed rate loan could be for you. On the downside, they offer less flexibility than variable loans. Variable rate loans usually come with a redraw facility and the flexibility to make extra repayments at any time so you may be able to pay down your loan faster. With a variable rate loan though, the interest rate can vary over the life of your loan, so your repayment amount can go up and down in line with rate fluctuations too.

Top tip:

• Ask yourself whether you’re likely to want to make extra repayments to pay your loan down faster, or if the certainty of locking in a low fixed rate would suit you better.

Novated leasing through your employer

Novated leasing is a car finance option that’s usually offered through your employer as part of a salary package. It’s an option that often comes with lower repayments too, with running costs like fuel, rego, insurance and servicing often bundled in with the lease package.

With a novated lease you'll usually pay less income tax even though the value of your salary package may be higher because your tax rate will be calculated on your net salary once car leasing costs, including any bundled running costs, are deducted.

Top tip:

• It’s important to know that you may need to pay a lump sum, sometimes close to 50% of the value of the vehicle, when your lease contract expires.

Finance through a car dealership

Buyer beware - even though dealer finance can seem like a convenient and seamless option, with your car dealership brokering finance for you, it often comes with a few surprises like higher interest rates, account fees and penalties for early repayments. 

Top tip:

• Make sure you crunch the numbers against your other finance options for the entire life of the loan to see whether you’ll be better or worse off overall.

A no-fuss car loan that puts you in the driver’s seat

Health Professionals Bank Car Loans¹ offer competitive rates, no ongoing fees, and flexible repayment options to suit your needs, not somebody else’s. Plus, you can finance accessories like car navigation systems, insurance and security within your loan amount. Keen to find out more?

Explore car loan options here.

1 Membership eligibility applies to join the Bank. All applications for credit are subject to our responsible lending criteria. Fees and charges apply. You can find our Consumer lending terms and conditions online or from any of our offices.

Please note – Before you decide on any of our products or services, we strongly recommend that you read both the Conditions of use Accounts and access and Fees and Charges booklets online or at any of our offices. We have not considered your objectives, financial situation or needs. For further information call 1800 472 265.

Allianz Comprehensive Car Insurance

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