In Australia, owning your own ride is often a necessity, whether for work or personal use. It’s no wonder there were over 20 million registered motor vehicles in the country as of 31 January 2021, a 1.7% increase from the previous year.
However, buying your dream car comes with a hefty price tag. That’s where motor vehicle finance can help. Whether looking for a new or used car, financing options allow you to spread out the cost and drive away without the strain of paying upfront.
But which is the best motor vehicle finance?
With so many options, it is natural to feel overwhelmed. Don’t worry. Curated by the experts at My Money House, this post will walk through the different motor vehicle finance in Australia.
Let’s get cracking!
Car Loans
A standard car loan is one of the most common motor vehicle finances in Australia, with 23.6% of Australians having one in 2024. Typically, you will come across two types of car loans:
1. Secured Car Loans
Considered the best motor vehicle finance in Australia, a secure car loan requires your vehicle as collateral. In other words, if you default on the loan, the lender has the right to repossess your car. A secured loan typically has lower interest rates because the lender carries lesser risk.
The benefits of a secured car loan include:
- Flexible loan repayment periods for 2 to 7 years
- The option for a residual value to reduce the monthly repayments
- Competitive interest rate
- A lump sum option to reduce the balance owed on the loan
- If the car is used for business purposes, a tax deduction can be made
- Lower interest rates due to the loan being secured against the vehicle
2. Unsecured Car Loans
If you prefer not to use your car as collateral, an unsecured loan might be your next best motor vehicle finance option. These loans don’t require you to tie any asset to the loan, but they tend to come with higher interest rates since there is more risk to the lender. Unsecured car loans are more flexible, making them a good option for individuals with a good credit history.
Novated Lease
If you’re an employee looking for a tax-effective way to finance a car, a novated lease is an excellent option. A novated lease works in the following way:
- The Novated Lease is a three-way agreement between you, your employer and the finance company.
- You will be using your pre-tax income to pay for the novated lease.
- You are the legal owner of your vehicle.
- You will be able to choose the vehicle that’s right for you.
- You will enjoy a higher disposable income.
A novated lease can offer significant tax savings for employees, particularly those in higher tax brackets. Keep in mind, though, that if you leave your job, you’ll need to take over the lease payments or negotiate a new agreement with your new employer.
Leasing Options
Vehicle leasing is another motor vehicle finance option that lets you drive the car you need without the burden of ownership. Typically, you can get:
1. Finance Lease
Under a finance lease, you can lease the car for a fixed period and make regular payments to the lender. You don’t own the car, but you have the option to purchase it at the end of the lease term by paying a residual amount. This motor vehicle finance works well for businesses that require flexibility in upgrading their vehicles.
2. Operating Lease
An operating lease is a short-term arrangement where the leasing company owns the car. At the end of the lease, you simply return the vehicle with no option to purchase. Operating leases are perfect if you want to avoid the hassle of ownership and prefer to upgrade your fleet regularly without worrying about depreciation or resale value.
Personal Loans
You can consider a personal loan if you are not looking for traditional motor vehicle finance in Australia. Personal loans can be used to finance a car and are generally unsecured, meaning you don’t have to provide collateral.
However, like an unsecured car loan, interest rates tend to be higher because the lender assumes more risk. The upside is a personal loan offers flexibility in how you use the funds, making it perfect if you want to finance both the car and other related expenses, like insurance or modifications.
How to Choose the Right Motor Vehicle Finance?
With several motor vehicle finance options, choosing the right one will require some research. Here are a few factors you need to consider:
1. Budget
First, think about how much you can afford in monthly payments. A finance option with a balloon payment might suit you if you want lower repayments now but can manage a large sum later. We recommend using our motor vehicle finance calculator to get a clear picture.
This tool will help you understand:
- Monthly repayments
- Interest rates
- And the total amount payable over the life of the loan
Use this motor vehicle finance calculator to compare different loan terms, interest rates, and down payments to find what fits your budget.
2. Ownership or Leasing
Do you want to own the vehicle outright or have the flexibility of leasing? If ownership is your goal, a secure car loan may be better, while a novated lease or finance lease is perfect if you want flexibility without the commitment of ownership.
3. Tax Considerations
If you want to use the vehicle for business, a finance lease can provide tax benefits. A novated lease also offers tax savings for employees.
4. Flexibility
Some options, like a finance lease or a novated lease, allow you to return or upgrade the car at the end of the term. This is a good choice if you want the latest model or are unsure about keeping the vehicle long-term.
Get The Best Motor Vehicle Finance in Australia
Whether you want to buy it for personal use or business, financing a vehicle is a major decision. Choosing the right option can save you time, money, and stress. So, take your time to understand your financing options and weigh their pros and cons carefully before you sign a loan agreement.
My Money House offers a variety of motor vehicle finance, from secure car loans to novated leases and personal loans. We provide solutions tailored to your needs, whether you are a first-time car buyer, a business owner, or just looking for a new vehicle.
Contact us to get started.
