Last Updated: September 7, 2024

Are you in the market to purchase a vehicle? If yes, great! You have a wealth of vehicles to choose from, from gas-powered SUVs to electric sedans.

That said, not everyone has the luxury of possessing enough equity to cover the full purchase price of a vehicle. And a majority of new and used vehicles fetch a price close to the mid-five figure mark—which is a significant amount of money for the average car buyer.

If you don’t have that amount of money in your bank account, don’t worry, you’re not completely out of luck. There are several financing options that allow you to manage your spending effectively, whether it be by spreading the payment over a longer term or availing of special discounts and grant schemes.

Listed below are some vehicle financing options you can consider. Take note that each financing option has its unique properties, and the best one is wholly dependent on your set of circumstances and buying power.

Let’s jump straight into it.

1. Bank Loan

When people need to lend money, a majority of people look to their banking provider to help them out. 

As the name suggests, this type of loan consists of a lump-sum payment provided by the bank for the vehicle purchase. By signing to their contract, you’ll be obligated to repay the loan based on the contractual length in set monthly periods. 

This loan will also come with additional interest rates, the percentage of which is dependent on factors such as your credit score, loan term, market rates, and whether the loan is secured or unsecured.

This type of loan is the most accessible and competitive option out there for car buyers. 

However, the kicker is that you have to first be able to demonstrate your ability to pay back before you get pre-approved for the loan. If you don’t meet the bank’s lending criteria—typically entailing a clean profile and high credit score—your application can be rejected.

2. Credit Card Payments

Another financing type that may be viable for those with high credit limits is a credit card cash advance scheme. This scheme involves using a credit card to pay off the monthly repayments for a purchased vehicle.

Some dealers may not accept this option, but if they do, it’s not often the best option. This is because there are additional fees and high interest rates that can accrue over time, often higher than traditional personal loans.

Regardless, if your loan application is rejected and if you can stomach the higher interest rates, this option is viable. This is especially true if you have access to a credit card already, which is the case for a majority of individuals.

3. Novated Lease

For employees who want to get their car for a cheaper price, they can consider going into a novated lease agreement with their employer. 

This financing option is one wherein the employer agrees to pay the monthly lease payments using the employee’s pre-tax income, thus lowering the car’s tax rate overall.

This lease doesn’t just cover the purchase price, it also covers associated expenses like maintenance, fuel, and insurance. These are all bundled into a single monthly payment, making the process of car management much simpler—and cheaper!

This type of finance agreement allows you to use the car immediately and gain some financial benefits along the way. By the end of the contract term, you can even choose to buy the car, extend the lease, or trade it for a new model.

However, once you break ties with your employer, the agreement ceases and you’ll be liable for the residual value of the car. So be sure to plan who you’re partnering with carefully and enter an agreement with an employer that’s proven their trust.

4. Chattel Mortgages

Another common vehicle financing option is chattel mortgages. This financial option is a secured loan mainly used by businesses. It entails the borrower buying and using a movable asset or property (in this case, the vehicle) from a loan provided by a lending company.

In this arrangement, the purchased asset becomes the collateral for the loan. If the borrowing business defaults, they give their security to the lender and they get to keep the asset and use it however they wish.

In a chattel mortgage agreement, the borrower of the loan owns the vehicle outright owing to the fact that they purchased it using a third-party lender’s lump sum payment. Furthermore, they also score in on some financial advantages, such as tax benefits from GST claims and tax deductions on interest payments.

Furthermore, chattel mortgages are also fairly flexible, with loan terms and lump sum agreements being fairly negotiable among different providers. If you want to learn more about this financing method, this page goes into further details.

5. Dealer Financing

If you prioritize convenience over all, you can consider dealer financing. This involves arranging your vehicle loan directly through the car dealership upon purchasing the vehicle.

Car dealerships often provide special and exclusive perks when someone buys their vehicle. This can come in the form of low interest rates, flexible repayment terms, or discounted cars during specific periods.

Furthermore, since you’re getting financing from your dealer directly, you don’t have to engage with multiple companies to handle the financing. This can make the process more streamlined from selecting the car to registering it.

That said, it’s important to note that dealer financing tends to have less favourable terms compared to bank or external lenders. As such, be sure to vet each possible option closely to secure the best deal.

6. Leasing

Don’t like the idea of owning and maintaining a car? Does the inevitable depreciation of the vehicle turn you off?

If you said yes to both, then you can consider leasing your car instead. This financial scheme reduces the need to make a vehicle downpayment and gives you access to a nice car from the get-go.

The difference, of course, is that you don’t get to own the car. This means all the payments you make for this car are considered an expense.  You also don’t get to paint or modify the car to reflect your branding (if you’re a business).

The good news is that you’re not directly responsible for the depreciation, interest, and even repair and maintenance work of the vehicle either. 

This flexibility allows you to save more—which is highly beneficial if you don’t see yourself owning the car over the long term. 

Furthermore, you can also choose to switch to the latest car model once your lease expires, which helps you future-proof business operations or test out the latest models.

7. Hire Purchase

If you do want to own the vehicle once you’re done making payments to it, then you can consider entering a hire purchase agreement.

This financing option enters you into an agreement with a lender wherein you’ll have to make regular payments over a fixed term. Once the contract is completed, the ownership of the vehicle is transferred to you.

This method spreads the cost of car ownership and makes it easier for you to manage your cash flow. 

This payment method, unlike traditional loans, doesn’t guarantee that you own the car until you have fully paid for it. So if you default, the lender has every right to claim back the car until you pay back.

8. Government Rebates and Grants

For buyers looking to purchase an electric vehicle in Australia, there are government rebates that they can consider getting to reduce the total cost of owning and installing an electric vehicle setup.

The reason these rebates exist is because the local and state councils are seeking to push for the adoption of environmentally friendly electric vehicles across the country. As such, most territories in Australia provide perks like stamp duty tax exemptions, discounted registration fees, and even $1000 rebates for EV charger installations.

If you want to buy an electric vehicle, consider entering and applying to one of these programs, granted that you’re eligible and it’s currently taking in applicants.  In doing so, you can save thousands of dollars and future-proof your transportation mode with a sustainable and innovative new vehicle.

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