For many people, a significant amount of their time is spent sitting in a car. If this is the case for you, there is a good chance that you want to be spending that time in a comfortable vehicle.
If you are looking to upgrade your four wheels, read on to learn three tips for financing your dream car.
1. Know your budget
Before you go looking for your dream car (although you probably already have a couple of ideas in mind), it is essential that you figure out your realistic budget. While it is easy to get carried away with what you think you can afford, you need to be honest with yourself about your situation.
When it comes to working out your budget, you want to keep in mind both what you can afford to spend and what you actually want to pay. Just because you can afford a particular car, doesn’t mean that you necessarily need to spend that amount.
In addition to the actual price of the car, you need to also budget for the cost of the vehicle’s registration and insurance. Do some research and ask for quotes from your insurance company for each potential model to decrease the chances of an expensive surprise.
Keep in mind that if you are planning on borrowing money, you want to ensure that all of your debt payments are 36 percent or less of your total income.
2. Research potential ways to finance a new car
Once you have ascertained a reasonable budget, it is time to research potential ways to finance a new car. For most people, purchasing a car outright isn’t an option and, instead, they want to utilize one of the possible financing options. Here are five possibilities:
- Chattel Mortgage: If you are going to be using your car for business purposes, then a Chattel Morgage may be a potential finance option. With this option, you will purchase the vehicle through an advance loan made by a financier.
- Novated Lease: A novated lease is an arrangement between an employee, an employer, and a finance firm that enables employees to get their dream car in a cost- and tax-effective manner.
- Personal Loan: This is a simple way to finance your new car. Before opting for a personal loan, make sure you are doing research into lenders and spend some time shopping around to guarantee the best interest rate possible.
- Car Loan: Slightly different from a personal loan, a car loan will allow you to obtain a vehicle (that is then used as collateral) through funds given by a finance company.
- Commercial Hire Purchase: This is another business option. With a Commercial Hire Purchase, an employee makes an agreement with a financier who then buys the vehicle. The employee then hires the car from the financier through monthly payments.
3. Look for other ways to lower the price
One of the essential things to know about financing your dream car is that there are always ways to lower the price.
For example, if you are looking to buy your car with cash, then you may want to consider trading your current vehicle into the dealer as this helps to lower the sales price and taxes of your new set of wheels.
Additionally, by opting for minimal options and accessories (such as forgoing a sunroof, heated seats, the latest sound system), you can keep the cost down, although, some of the add-ons may be necessary for you, like air conditioning or automatic transmission.
Last but not least, particularly if you want a luxury car, you can look into the used market. Often, you can find luxury cars in excellent condition for a lower price due to depreciation. However, ensure you are doing a thorough inspection of the vehicle so you don’t have an expensive surprise problem on your hands.
When it comes to car finance, it is essential that you conduct thorough research before agreeing to anything. As there is a multitude of options on the market, it is only through due diligence that you will find the right choice for you and your dream car.
Have you recently financed your dream car? What option did you choose? Let us know your thoughts and experiences on this topic in the comments below!
About the Author
Rob Chaloner is the Founder and Managing Director of Stratton, and is passionate about smarter ways to buy and finance cars. With Stratton, he’s working to help Australian buyers disrupt the traditional car buying, financing and insurance markets through smarter products and online services.