lease-or-buy-a-car

Leasing vs buying outright: Should I lease or buy a car?

How to decide whether to buy or lease a car.

If you can't decide whether to buy or lease a car, you're not alone. Deciding on the best financing option for you is tricky, as both a lease and a car loan can be with you for a number of years. Cars are a significant expense whether you decide to lease or buy and the decision should be influenced by not only financial factors but also your individual needs. Read our guide below on what's involved with both leasing and buying and find out the best option for you.

Leasing and buying

Leasing a car involves you borrowing a vehicle under a contract that allows you to use it to drive an average number of kilometres annually. Leased cars are covered by warranty and the latest models are usually available. Leases also allow you to upgrade your car every two or three years.

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 outright.

leasing vs buying a car

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.

Ready to apply? Compare car leasing and car loans

Rates last updated August 16th, 2018
Name Product From Price Per Week Insurance included Membership Fee Excess km cost Product Description
Splend Car Rentals
$249
Yes
$275
$0.10
Rent an Uber-ready vehicle from Splend and get access to fuel discounts, referral bonuses and member only benefits. Rent-to-Drive and Rent-to-Buy options available.
DriverLend
$77
No
$0
$0
Driverlend is a finance broker. Lease or buy a car with Driverlend and you could get up to 25% discount on dealership prices for a new vehicle.
DriveMyCar Uber Rentals
$179
Yes
$100
$0.20
A peer-to-peer rideshare platform that offers insurance, maintenance and 24-hour roadside assistance in the all-inclusive price. You'll get access to discounts if you rent longer than six months.
Europcar Uber Rental
$185
No
$0
$0.25
Benefit from 24/7 roadside assistance, a wide range of vehicles and no signup fee to start driving with Uber. A minimum four-week rental period applies.
Hertz Uber Rental
$217
Yes
$0
$0
You can Rent a car from Hertz get access to 24/7 roadside assistance, no lock-in contracts and no joining fees. Limited areas.

Compare up to 4 providers

IMB New Car Loan

IMB New Car Loan

5.99 % p.a.

fixed rate

6.34 % p.a.

comparison rate

  • No monthly fees
  • No early repayment fees
  • Borrow up to $75,000
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100% confidential application

IMB New Car Loan

A low rate loan to finance new vehicles or cars up to two years old. Borrow up to $75,000.

  • Interest rate: 5.99% p.a.
  • Comparison rate: 6.34% p.a.
  • Interest rate type: Fixed
  • Application fee: $250
  • Minimum loan amount: $2,000
  • Maximum loan amount: $75,000
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Promoted
Rates last updated August 16th, 2018
$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Monthly Service Fee Application Fee Product Description Monthly Repayment
IMB New Car Loan
5.99% (fixed)
6.34%
$2,000
1 to 7 years
$0
$250
Borrow as little as $2,000 at a competitive fixed rate
Finance a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.
Loans.com.au - New Car Loan
From 5.44% (fixed)
5.99%
$5,000
3 to 5 years
$0
$400
Optional balloon payment available to reduce your repayments.
A competitive rate car loan suitable for a new cor used car.
Latitude Motor Vehicle Loan
From 6.99% (fixed)
8.1%
$5,000
1 to 7 years
$10
$295
Finance a range of vehicles including cars, motorbikes, boats and caravans.
Apply online to finance a new or used motor vehicle and receive a response in 90 seconds. You will receive a competitive tailored rate of between 6.99% p.a. to 14.99% p.a.
Stratton Finance New Car Loan
From 5.29% (fixed)
6.56%
$18,000
1 to 7 years
$8.90
$459.20
Fixed or variable rates starting from 5.29% p.a.
Apply for up to $100,000 and have up to 7 year(s) to repay. You can use cash or trade in a vehicle to use as a deposit.
Sydney CU Special Variable Car Loan
5.95% (variable)
5.95%
$10,000
1 to 7 years
$0
$0
Apply for a loan up to 50000.
Benefit from a flexible, variable rate to finance a car up to 3 years old with SCU.
Beyond Bank Low Rate Car Loan
From 5.69% (fixed)
5.97%
$25,000
1 to 7 years
$0
$175
Offset your interest with a Car Budget Account.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.
Bank Australia Car Loan
6.45% (fixed)
6.66%
$1,000
1 to 7 years
$0
$150
Waived establishment fee for safe or green-rated cars.
A competitive rate and the ability to offset your car’s carbon emissions for the loan term.
CUA Secured Fixed Car Loan
6.79% (fixed)
6.92%
$5,000
1 to 7 years
$0
$0
Finance a new or used vehicle up to 7 years old.
Benefit from additional repayments, no ongoing fees and access to a redraw facility with this competitive loan from CUA.
RACV New Car Loans
From 5.99% (fixed)
6.55%
$15,000
1 to 7 years
$0
$399
Benefit from 5-hour pre-approval.
A competitive rate car loan from RACV with no monthly fees.
MyState Secured Personal Loan
From 7.99% (variable)
8.96%
$10,000
1 to 10 years
$10
$200
Your choice between secured or unsecured.
Apply for a loan up to $75,000 and benefit from loan terms up to 10 years.
IMB Secured Personal Loan
6.89% (fixed)
7.24%
$2,000
1 to 5 years
$0
$250
Secure this loan with a car and use the funds for any purpose.
Competitive 6.89% p.a. rate available to all approved applicants. Loan amounts up to $60,000 available.

Compare up to 4 providers

Thinking of buying or leasing a car? Here are the pros and cons

Pros Cons
Leasing
  • 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
Buying
  • 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.
  • 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.

Picture: Shutterstock

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Car Loan Offers

Important Information*
IMB New Car Loan

Borrow up to $75,000 for a new car up to two years old. Competitive 5.99% p.a. rate available to all approved applicants.

Loans.com.au - New Car Loan

This car loan is for new cars and offers a low fixed rate and no ongoing fees.

Latitude Motor Vehicle Loan

Apply online to finance a new or used motor vehicle and receive a response in 90 seconds. You will receive a competitive tailored rate of between 6.99% p.a. to 14.99% p.a. based on your risk profile.

Stratton Finance New Car Loan

Apply for up to $100,000 and have up to 7 year(s) to repay. You can use cash or trade in a vehicle to use as a deposit.

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29 Responses

  1. Default Gravatar
    RahulJuly 8, 2018

    Query : Lease or Finance
    If I want to lease a $40000 car for 3 years for business use will this be treated as a loan as compare to Finance
    If I Finance $30k with balloon payment of 10K at the end of 5 years what is my actual loan amount
    $30K or $40K

    I Want to know this as I will need a home loan 2years down the track.

    what is the right approach to lease or to finance

    • finder Customer Care
      MayJuly 23, 2018Staff

      Hi Rahul,

      Thank you for your inquiry and sorry for the delay.

      1. If I want to lease a $40000 car for 3 years for business use will this be treated as a loan as compare to Finance.
      Well, that depends on the type of car leasing you would choose. You can either go for on “operating lease”, “finance lease” or “fleet management”. These three options are well-explained on this page.

      2. If I Finance $30k with balloon payment of 10K at the end of 5 years what is my actual loan amount $30K or $40K
      As to the actual loan amount, this will depend on the company/lender you go with, their interest charged to the loan, and term. You might also add to the total loan amount the fees that involved in the loan. You can learn more about balloon payments from our guide on this page.

      3. What is the right approach to lease or to finance?
      As we’re a comparison website, I’m afraid we can’t really suggest or recommend, as it entirely depends on your business’ financial situation. Both leasing or financing have pros and cons, so you’d be best to consider the financial factors as well as your business’ needs. The above article gives helpful advice about going for a lease or buying (including through loan financing) your business vehicle.

      Hope this helps.

      Cheers,
      May

  2. Default Gravatar
    JacquelineApril 1, 2017

    I have salary packaged the full amount possible. Am I still able to get tax benefits if I choose to lease a vehicle.

    • finder Customer Care
      ArnoldApril 16, 2017Staff

      Hi,

      Thanks for your inquiry.

      Yes, you are still able to get tax benefits when opting for Novated Lease. 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.

      Hope this information helped.

      Cheers,
      Arnold

  3. Default Gravatar
    SteveAugust 22, 2016

    I work for a mining company who offer novated leases (employee contribution method) to employees.

    There are two companies nominated to manage the lease arrangements.

    I have found a suitable vehicle and have had quotes for lease finance from financiers not connected with then novation management companies for this vehicle.

    According to the information that is available from the novation management companies on their website, there appears to be no restriction on where the vehicle is financed. In other words, it appears that I can source cheaper finance from a finance company and have the vehicle lease novated through a management company.

    According to the Novation management company representative, finance can only be arranged through them and not from an outside source.

    Is this correct? Are novation management companies finance companies also or do they pressure consumers into taking their finance option?

    • finder Customer Care
      ElizabethAugust 23, 2016Staff

      Hi Steve,

      As you enter into the novated lease agreement in your own name you should be able to choose the financier. The lease is a financial responsibility and if you change employers you’ll become responsible for the repayments, so it’s important to select a financier you’re happy with. However, your employer may only offer novated leases through these specific providers. It would be best to talk directly with your employer and explain that you’ve selected a different leasing company.

      I hope this helps,

      Elizabeth

  4. Default Gravatar
    DarrenAugust 6, 2016

    The company I work for as a sales representative offers novated leases. With a novated lease, you don’t pay the GST with the purchase of the car, so there is a saving there. I get a reasonably good car allowance as part of my salary, and currently have a loan, and pay all the other running costs out of my own salary. I do a PAYG tax variation so that I get the tax benefit upfront each week. With this way, you can only claim the interest part of the loan, and then claim depreciation and other running costs, which varies year by year.
    Which works out better between a Novated lease, and the above method of loan for someone who uses the car for 95% business use?

    Many thanks
    Darren

    • finder Customer Care
      ElizabethAugust 8, 2016Staff

      Hi Darren,

      Unfortunately I’m unable to offer you personal advice so can’t advise you either way, but it really would depend on a number of factors in which would work out better for you cost-wise. This includes running costs, your car allowance, etc. We have a few tools on finder that can help, including a novated lease calculator, but you may want to get some tax advice in this matter.

      Thanks,

      Elizabeth

  5. Default Gravatar
    DavidJuly 4, 2016

    I’m about to start a 7-month stay in Australia as a visiting academic, with my family of 4.
    Is it a good idea (and will I get approval) to lease a car for that period or should I directly look into buying 2nd hand?
    Thanks in advance
    David

    • finder Customer Care
      ElizabethJuly 5, 2016Staff

      Hi David,

      Unfortunately, I can’t give you personal advice because it really depends on your personal financial situation, but it may help to break down the costs of each option to work out what may work best for you. In terms of buying a car there are several costs involved and you will also need to factor in insurance (learn more about the costs here). With car rental, these costs will be factored into the rental cost. You may also be able to save with a coupon code, which you can find on this page along with a guide on car rentals. Car-sharing services such as GoGet are another option to consider.

      I hope this information helps,

      Elizabeth

  6. Default Gravatar
    RoosterJune 1, 2016

    If I have salary sacrificed too much for my car, do I get the money paid back to, ie is it pit back into my salary and taxed accordingly?

    Thanks

    • finder Customer Care
      ElizabethJune 3, 2016Staff

      Hi Rooster,

      You’ll need to look at the terms of the agreement, but generally, if you do fewer miles than is budgeted or you have salary sacrificed too much, the money should be paid back to you. You’ll need to contact the company administering the lease.

      Hope this helps,

      Elizabeth

  7. Default Gravatar
    MiniMeMay 6, 2016

    I recently started a sales job (commission only, no salary). My 11 year old car died just a few days ago (had only done 77,000km in 11 years). So, I am in the market for a new one (I’m borrowing a car meanwhile). I have a few options:
    1. buy a new car outright (huge cash outlay from my savings. I want to get my lifelong dream car… a mini convertible)
    2. Wait and buy a demo mini
    3. Buy a used mini but risk costly repairs
    4. lease the mini
    5. approach my employer to contribute to a lease but considering I’m not paid a salary I don’t know that this is possible?

    Any suggestions?
    Thank you!

    • finder Customer Care
      ElizabethMay 6, 2016Staff

      Hi MiniMe,

      I can’t advise you which will be the best option for you as it will really depend on your own individual needs and financial situation. However, I can provide you with some general information and guides that will help.

      Using your savings is a great way to purchase a car and won’t leave you in debt except you won’t have a buffer to use for anything else, and you should also consider if you’ll need that money for anything else. In terms of demonstrator vehicles, this is also a great way to save – you can find out just how much in this guide here.

      A used car can also be a good chance to grab a bargain as long as you inspect the vehicle thoroughly before, we’ve written a used car checking guide that you can take a look at to familiarise yourself.

      Leasing the mini may also be an option if that works for your needs and lifestyle, but just keep in mind you won’t be owning an asset. In terms of a novated lease it will be up to you employee whether they offer this option to you, if they do this is an easy method for you to pay for a vehicle. You can find out more about this option here.

      I hope all of this information will be of use.

      Thanks,

      Elizabeth

    • Default Gravatar
      MiniMeMay 6, 2016

      Thanks so much Elizabeth. Much appreciated!

  8. Default Gravatar
    DoraFebruary 17, 2016

    If I get a novated lease on my car will I need to pay FBT?

    • finder Customer Care
      ElizabethFebruary 17, 2016Staff

      Hi Dora,

      It depends which method you choose when taking out a novated lease; the Fringe Benefits Tax method or the Employee Contribution Method. This page outlines those two options so you can choose the best one for your situation. You can also click on the ‘speak to a broker’ tab at the top of the table to see if you qualify to speak to one of our advisors.

      Hope this helps,

      Elizabeth

  9. Default Gravatar
    TarunDecember 31, 2015

    My current car is under novated lease, the lease expires in Feb 2015. There is a balloon amount which I need to pay to acquire the car.

    I want to keep the car for another 2 years, can you help me with a tool or calculator to decide if i should refinance or go in for another lease term?

  10. Default Gravatar
    NatDecember 27, 2015

    This information has been really useful, including the section on car loan rates through RACQ and the banks. Thank you !!!

    • Default Gravatar
      JodieDecember 30, 2015

      Hi Nat,

      Thanks for the feedback we are glad that you found the content so useful.

      Regards
      Jodie

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