Car finance and car loans are both ways to borrow money to buy a car. But there are differences in some key areas. Let us look at the merits of both options, considering the context of the best car loans in Australia.
Car finance is a type of lease where you make monthly payments to the lender. At the end of the lease term, you have the option to purchase the car for a predetermined price, or you can return it to the lender.
Car loans are traditional loans where you borrow a sum of money from the lender and then repay it over time with interest.
It depends on your individual circumstances, which is better for you. A comparison of the two options is presented below:
Car Finance
Pros:
Lower monthly payments than a car loan.
There's no need for a down payment.
At the end of your leasing period, you may be able to get a new car.
Cons:
You may have to pay a security deposit.
You may have to pay early termination fees if you decide to end the lease early.
You may not have the option to purchase the car at the end of the lease term.
Car loan
Pros:
At the end of a loan period, you can own that car.
You can make larger payments to pay off the loan faster and save money on interest.
You may be able to negotiate a lower interest rate than you would with car finance.
Cons:
Higher monthly payments than car finance.
You may need to make a down payment.
You will be responsible for all maintenance and repairs on the car.
If you are unsure which option is right for you, it is a good idea to speak to a financial advisor. They can help you assess your individual circumstances and recommend the best option for you.