If you're looking to get a car, it can be difficult to choose between buying one outright or leasing. Both have a number of benefits and drawbacks, and it's important that you make the right financial decision for your situation.
See which one may suit your needs and learn your options below.
Leasing a car gives you access to a vehicle for an agreed period, which can be for personal or business use, or a combination of the two. You will generally make regular payments over the course of the lease and may have the option to buy the car, or starting leasing a new vehicle, at the end of the lease term.
Buying a car involves you purchasing a vehicle so that you own the vehicle outright. You can either make your purchase using a car loan, which can be paid off in a period of up to seven years, or by buying the vehicle using your own savings. You are then free to use the vehicle as you wish, as well as sell it.
Leasing vs. buying: Questions to ask yourself
How often will I be driving the car? Leases usually require you to drive an average amount of kilometres annually, so you need to consider this before you apply.
Do I own a car now? If you already own a car and are looking at purchasing a new one you may be able to take advantage of a trade-in offered by some dealerships. You also have the option of selling a car to be able to put more money on a lease upfront
Will the car be for business or personal use? If your car is mainly for business use you may be able to work out a novated lease with your employer, or if you are opting for a personal car you need to consider how you will be using it and whether a lease or purchase will be best for you.
What is my credit history like? Leasing companies may not approve you for a lease if you have bad credit history, but then again some loan providers may not approve you either. If you have negative marks on your credit file you might want to consider a secured loan, as this is seen as less of a risk for the lender you may have a better chance of being approved.
Thinking of buying or leasing a car? Here are the pros and cons
Does not tie you down to a single vehicle and gives you the option of upgrading your car every two or three years
Requires less upfront money
Is an option for people who travel frequently and need a car in different locations
Leasing may be a good option for businesses who don't want their cash flow tied up in a depreciating asset
In the long term, leasing a car may be just as or more expensive than a car loan when you take into account monthly repayments, fees and charges
You are unable to make any alterations to the car
You cannot claim the car as your own asset for other borrowing or financial purposes
If you decide to take out a loan your repayments will be similar to what you would pay when you were leasing, but at the end of the term you will own the car outright
Whether you take out a car loan or buy the vehicle outright, you can still claim the car as your own asset.
May require a larger upfront cost
The value of the car depreciates in time, making your investment less valuable
What financing options are available for cars?
Secured personal loan. A personal loan that is secured works by you using the car as a guarantee in order to finance it. This is less of a risk for the lender as they can sell the car should you default on the loan. These loans generally have lower rates and fees and are offered as a fixed or variable rate option.
Novated lease. A novated lease is basically a lease agreement between you, your employer and the lease provider. Some of your lease obligations are transferred to your employer and as such your car is treated like a company car for tax purposes. This type of lease can save you money by allowing you to access benefits such as GST discounts, income tax savings and savings on the cost of running the car.
Matt Corke is Finder's head of publishing for rest of world and New Zealand. He previously worked as the publisher for credit cards, home loans, personal loans and credit scores. Matt built his first website in 1999 and has been building computers since he was in his early teens. In that time, he has survived the dot-com crash and countless Google algorithm updates.
You'll receive a fixed or variable rate depending on the lender you are approved with Apply for up to $250,000 and use cash or trade in a vehicle to use as a deposit. Optional balloon payment available.
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