These days, it’s essential to have a vehicle to your name if you want to get around town. Luckily, there are plenty of ways for you to get your hands on a car.
One way is getting it as a gift from parents, buying it second hand online or through a friend, or you can either get a car loan or car finance and pay for it through a specific amount of time.
Out of all the ways mentioned above, the most popular method is to either get a car loan or go through car finance to get your own ride. But what’s the difference between the two?
A car loan is when you borrow money from a lender, usually a bank and use it to buy a car. You are then expected to make payments towards the loan. Usually lasts for a few years. It has the following advantages:
Car loans can help build equity in the vehicle
Lower long-term costs with lower interest rates
No residual payments once the loan is paid off
Freedom to customise the car as you wish
Your credit score must be in good condition
Down and monthly payments cost more
Vehicle depreciates over time
You have to spend more on insurance and maintenance
Car finance or a car lease is when you rent a car for a prolonged period of time. Unlike a car loan, it’s a lot easier to get approval. But just like with a car loan, you will also be expected to make monthly payments for the car, which will be discussed on your contract. It has the following advantages:
You can rebuild bad credit through a car lease
Flexible repayment options
Affordable down payment
Can get a new car every few years or buy the car you currently have
You can’t modify the vehicle
Residual payments if you choose to purchase instead of renewing
Limited yearly mileage
The car is not yours after the lease
Overall, whether you decide to get a car lease or car loan will depend on your finances and how you see yourself using the vehicle you are looking to purchase.
For instance, if you are looking to get a ute and use it for a lot of outdoor and other personal use where you ultimately see yourself making full use of it each time, then a car loan is your best choice, especially if you have good credit.