Is it better to lease or buy a car?
Not sure if you should buy or lease a car in Australia? See pros and cons and compare financing options.
"To lease a car, or to buy a car, that is the question."
If you can't decide between buying or leasing a car, then our guide will help you. We've listed the pros and cons of each option.
You can also compare the financing options available.
Leasing vs buying
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.
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.
- Unsecured personal loan. An unsecured personal loan can not only be used to finance a vehicle, but can also be used for any other purchase you wish to make. These loans are flexible but they usually come with higher fees and rates because it is a risk to the lender.
- Dealer finance. If you purchase a car from a dealership then they will most likely have a financing option they are able to offer you. It's best to do your research before you sign up as dealer financing usually comes with inflated rates and high fees. Dealer finance usually comes with a balloon payment at the end that is designed to lower your ongoing repayments.
- 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.
Thinking of buying or leasing a car? Here are the pros and cons
Compare your leasing and car loan options
Frequently asked questions about leasing or buying a car
How often will you be driving the car?
Do you own a car now?
Will the car be for business or personal use?
Will you have to pay maintenance costs?
Whether you have to pay servicing or maintenance costs will depend on your lease agreement. These costs may be entirely included in your lease, you may have to cover some servicing costs (such as oil changes), or you may have to pay extra for a maintenance package.
What is your credit history like?
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