Car Finance for Women
Car Finance Options
Most of us don't have arm-breaking wallets like Kim Kardashian and Victoria Beckham, so you might have to consider professional financial assistance to buy your dream car. But how do all the options stack up? And which one suits you best? AutoChic will take you through your options...
This is the most straightforward finance option. In a nutshell, you borrow money from a finance company to buy a car and then you make weekly, fortnightly or monthly repayments at a fixed (it stays the same the whole duration of your loan) or variable (they can change it on you) interest rate.
Secured car loan
With a secured car loan, a finance company loans you the money to buy your dream car. It's your car as soon as you buy it, but you of course have to make regular repayments.
This type of loan has a lower interest rate than a personal loan because if you end up not being able to pay it back or miss an agreed amount of payments, you'll have to hand over your car keys to the finance company!
Line of credit
This is kind of like playing Monopoly. You ‘cash in' and borrow how much equity you have (the difference between what you owe on a home loan, and what the finance company says the property is worth).
The downside is that if interest rates soar and you end up in serious financial trouble, you might have to give up your home - either by selling it or giving it to the finance company as payment.
You rent the car for 1-5 years and make monthly payments. The car isn't yours at the end of the lease period. A personal lease is good for people who will use the car for about 50+ per cent of the time, although you can get some tax deductions if you use the car for business as well.
If you own a business, you can go with one of the following:
This is basically long-term car hire and is great people who regularly use cars for work (e.g. sales reps, couriers, pizza delivery, etc.) The finance company owns the car but you pay them rent to use it for 1-5 years. This option is fully tax deductible.
You hire the car and actually own the car when the balloon payment (the final, pay-what's-left-owing payment) is made, but you can lose the car and any money you've paid off so far if you miss an agreed amount of payments.
Hire purchase is great for small businesses because you can increase the amount of the deposit or balloon payment to make monthly repayments smaller, or vice versa. You can also get some tax deductions for depreciation, GST and interest charged.
The finance company gives you money to buy the car, but then you have a car mortgage with the finance company. You have 2-5 years to pay it off; have fixed interest rates, fixed monthly repayments and can get some tax deductions.
It's great for businesses, partnerships and sole traders who use the cash accounting method, as they can claim the GST of the car's price up front. They can also claim the interest charges and depreciation as a tax deduction.
Salary packaging/novated lease
This is an arrangement between a finance company, an employer and an employee that allows the employee to hire a car from the finance company (a mouthful, we know!). For tax return benefits, the employee makes monthly payments to the finance company from their pre-tax salary, plus any fringe benefits tax, insurance and car running costs.