Benefits of buying a car on finance

When you’re buying a car you have two options. Either pay cash for it upfront or finance it with a loan. While car finance might be something you’ve shied away from in the past, there are some advantages of going with this option.

First let’s look at some of the pros and cons of buying a car with cash.


  • There’s no weekly or monthly car payments to worry about
  • You don’t have to pay interest
  • Leaving your cash in the bank will earn you nominal interest given current interest rates


  • You will have to save for longer (wait) the higher the purchase cost is
  • You’ll have less money for other investments and unforeseen events
  • You may get a higher return on your cash if you invest it elsewhere

It can be wiser to preserve you cash for other investment purposes that will appreciate in value, and buy a new (or nearly new) car on finance. New cars have fewer breakdowns and repairs, and they all come with a dealer warranty.

4 Benefits of Buying a Car on Finance

Now let’s look at some of the benefits of buying a car on finance.

1. You can borrow 100% of the car’s purchase price

If you need a car urgently you don’t have to wait until you’ve saved all or even part of the money. You can drive off in your new car within the time it takes the dealer to prepare your vehicle and organise the paperwork. If the monthly finance repayment is manageable, then car finance makes a lot of sense.

2. Car finance can be tax deductible

If you own a business and the business borrows money to acquire a company car then the finance costs can be tax-deductible. Check with your accountant, but according to the ATO you can claim the interest on the car loan, insurance premiums, repairs, servicing and more.

3. You can spend the cash on other important things

Spending a large, lump sum of cash upfront on a car isn’t always the best option, especially if you have a family to support or a business to run. You may need that cash for unexpected expenses, like a medical bill or urgent business expenses.

4. Helps you establish credit

By making car loan payments on time you establish a finance track record and build good credit. This is very useful for the future if you need finance for other purposes, like a mortgage or business loan.

Overview of car finance options

If you’ve decided that car finance is the way to go you have a few different options to consider. Here’s an overview of each to help you choose the best one for you.

Personal loan

Borrow a one-off lump sum and make regular set payments, including interest, to pay it back over time, normally up to 5 years. Can be secured or unsecured. Unsecured personal loans have higher interest rates. You typically have between one to seven years to pay it back.

Car loan

Similar to personal loans, but the car being purchased acts as security for the loan. If you default on your loan repayments you run the risk of your car being seized. Since it’s a secured loan, interest rates can be lower.

Credit card

If you can stump up some cash, it can be worth paying for the rest on credit card if you have a card with a low rate. Some lenders offer credit cards with a 0% purchase rate for up to 27 months.

Finance lease

The car is rented to you for an agreed period, and you pay a fixed rental amount and interest rate, as well as maintenance and repairs. Some leases include a purchase option when the lease runs out.

Hire purchase

A deposit is paid and a monthly hire payment agreed upon. The business uses the car for a certain length of time, then ownership is transferred to you once the final payment is made.

Chattel mortgage

A lender loans you the money to buy a car, and you own the vehicle from day 1. The loan is secured by the vehicle so interest rates are lower than an unsecured loan.

Novated Lease

A car that comes as part of a salary package. Your employer deducts payments and vehicle maintenance costs from your pre-tax salary to pay the lender. Tax benefits associated with this type of finance make this an attractive form of finance for businesses with multiple vehicle requirements for their staff.

Operating Lease

Similar to car rental. You pay for use of the vehicle only. There is no outlay of capital and no risks associated with owning it.

Need Car Finance? Talk To A Broker

Chat to Westminster today to find a car finance option that suits your needs. Our car finance brokers can arrange pre-approval so you can car shop at your leisure and avoid a higher interest rate from a dealer.