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.

We’re reader-supported and may be paid when you visit links to partner sites. We don’t compare all products in the market, but we’re working on it!

"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.

leasing vs buying a car

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

ProsCons
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
  • Often sill covered by the manufacturer's warranty, so servicing and ongoing maintenance charges are usually covered
  • 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

Compare your leasing and car loan options

$
Name Product Interest Rate (p.a.) Comparison Rate (p.a.) Min Loan Amount Loan Term Application Fee Monthly Service Fee Monthly Repayment
Plenti Car Loan
From 4.89% (fixed)
5.44%
$10,001
3 to 7 years
from $249 to $799
$0
You'll receive a fixed rate from 4.89% p.a.
Borrow up to $100,000 with a Plenti Car Loan and benefit from no early repayment or exit fees.
IMB New Car Loan
4.88% (fixed)
5.23%
$2,000
1 to 7 years
$275.12 ($250 Application fee + $25.12 PPSR fee)
$0
You'll receive a fixed rate of 4.88% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one that's up to two years old.
Credit Concierge Car Loan
From 2.99% (fixed)
4.07%
$10,000
1 to 7 years
$350
$8.50
You'll receive a fixed rate of 2.99% p.a. with a comparison rate of 4.07% p.a.
Get access to over 20 providers to fund a new or used car.
loans.com.au - New and Dealer Used Car Loan
3.99% (fixed)
4.53%
$5,000
3 to 5 years
$400
$0
You'll receive a fixed rate from 3.99% p.a. based on your risk profile
Finance a new car and benefit from features such as fast approval, no ongoing fees and an optional balloon payment. Settle the loan before 30 November 2021 and enter the draw to win a $1,000 fuel gift voucher. T&Cs apply.
Alex Bank Car Loan
From 4.99% (fixed)
4.99%
$2,100
6 months to 5 years
Waived $295 establishment fee
$0
You'll receive a fixed rate between 4.99% p.a. and 19.99% p.a.
Borrow up to $30,000 for terms between 6 months and 5 years to finance a car. The one-off $295 establishment fee will be waived for loan applications submitted by 3 November 2021. T&Cs apply.
Wisr Secured Car Loan
From 4.74% (fixed)
5.01%
$5,000
3 to 7 years
$195 for refinance and dealer sale ($245 for private sale)
$0
You'll receive a personalised interest rate from 4.74% p.a. to 16.01% p.a. based on your risk profile
A flexible car loan from $5,000 - $63,000 with personalised rates and rewards for strong credit customers.

⭐Special Offer: Wisr's standard establishment fee $605 will be reduced to $195 for applications submitted through Finder. T&Cs apply.
Stratton Finance New Car Loan
From 3.85% (fixed)
4.05%
$10,000
3 to 7 years
$700
$8.25
You'll receive a fixed rate from 3.85% p.a. 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.
NRMA New Car Loan
From 4.99% (fixed)
5.69%
$5,000
1 to 7 years
$499
$0
You'll receive a fixed rate from 4.99% p.a.
Purchase a new or used car up to 3 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.
Great Southern Bank Fixed Rate Car Loan
6.79% (fixed)
7.16%
$5,000
1 to 7 years
$265 ($175 Establishment Fee + $90 Security Administration Fee)
$0
You'll receive a fixed rate of 6.79% p.a.
A secured loan with a high maximum borrowing amount up to $100,000. Redraw facility and no monthly fees.
NAB Personal Loan Unsecured Fixed
From 6.99% (fixed)
7.91%
$5,000
1 to 7 years
$150
$10
You'll receive a fixed rate between 6.99% p.a. and 18.99% p.a. ( 7.91% p.a. to 19.83% p.a. comparison rate) based on your risk profile
Borrow from $5,000 to $55,000, with 1 to 7 year loan terms available. This loan comes with no fees for extra repayments and no early exit fees.
Symple Loans Personal Loan
From 5.75% (variable)
6.47%
$5,000
1 to 7 years
from 0% to 5% of the loan amount
$10
You'll receive a personalised interest rate from 5.75% p.a. to 25.99% p.a. based on your risk profile
Borrow up to $50,000 to pay for what you need.
Driva Car Loan
From 2.85% (fixed)
4.39%
$2,000
1 to 7 years
$295 (Varies by lender, starting from $295)
$10
You'll receive a fixed rate from 2.85% p.a.
Borrow up to $250,000 with loan terms from 1 to 7 years. Get access to a range of lenders.
OurMoneyMarket Car Loan
From 5.35% (fixed)
5.65%
$2,001
1 to 7 years
$250
$0
You'll receive a fixed interest rate from 5.35% p.a. to 14.99% p.a. based on your risk profile.
Borrow between $2,001 and $75,000 to finance a new or used car up to 7 years.
loading

Compare up to 4 providers

Name Product Price Per Week (from) Insurance Included? Membership Fee Excess Distance Cost
Splend Car Rentals
$269
Yes
$275 (26 week rental period)
$0.10 per km
Get access to fuel discounts, referral bonuses and member only benefits when you rent a rideshare car with Splend. Rent-to-Drive and Rent-to-Buy options available.
DriveMyCar Uber Rentals
$160
Yes
$0
$0.10 per km
Get insurance, maintenance and 24-hour roadside assistance in the all-inclusive price. Discounts available for longer rental periods.
Splend Rent-to-Own
$269
Yes
$275 (26 week rental period)
$0.10 per km
Rent a car and pay it off as you go with no lock-in contract, membership benefits and flexible rental options
loading

Compare up to 4 providers

Frequently asked questions about leasing or buying a car

How often will you 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 you 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.

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?

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.

Picture: Shutterstock

More guides on Finder

Car Loan Offers

Important Information*
Logo for IMB New Car Loan
IMB New Car Loan

You'll receive a fixed rate of 4.88% p.a.
A low minimum borrowing amount of $2,000 that you can use to purchase a new car or one up to two years old.

Logo for Beyond Bank Low Rate Car Loan "Special Offer"
Beyond Bank Low Rate Car Loan "Special Offer"

You'll receive a fixed rate of 4.69% p.a.
Take advantage of a competitive rate, pre-approval and no early repayment fees when you finance a car under two years old.

Logo for RACV New Car Loans
RACV New Car Loans

You'll receive a fixed rate from 4.99% p.a.
A larger loan of $5,000 or more to help you buy a new or used car. 5-hour pre approval available and no ongoing fees.

Logo for NRMA New Car Loan
NRMA New Car Loan

You'll receive a fixed rate of 4.99% p.a.
Purchase a new or used car up to 2 years old and benefit from a fixed rate and no monthly fees. Pre-approval available within 5 business hours.

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.

29 Responses

    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

      Avatarfinder 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 compared to Finance?
      Well, that depends on the type of car leasing you would choose. You can either go for “operating lease”, “finance lease” or “fleet management”. These three options are well-explained from the link above.

      2. If I Finance $30k with a 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 the term. You might also add to the total loan amount the fees involved in the loan. You can learn more and compare your car loan without balloon payments.

      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 it’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

    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.

      Default Gravatar
      ArnoldApril 16, 2017

      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

    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?

      Avatarfinder 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

    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

      Avatarfinder Customer Care
      ElizabethAugust 8, 2016Staff

      Hi Darren,

      Unfortunately, I’m unable to offer you personal advice, so I can’t advise you either way. However, it really would depend on a number of factors which would work out better for you cost-wise. These include 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

    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

      Avatarfinder 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. If you wish to learn more about the expenses and costs of getting a car, please read our buying a car guide. With car rental, these costs will be factored into the rental cost. You may also be able to save with car hire coupon codes. Car-sharing services such as GoGet are another option to consider.

      I hope this information helps,

      Elizabeth

Go to site