New Car Purchasing Options and Why?

G’day all,
In the market for upgrading to a new ride and am wondering what sort of purchase option to go with (pay upfront, finance, loan, etc).
Assuming you have all of the following options available in the poll for purchasing, which one would you go with?

  • If financing, the goal is to pay off the loan asap to save on interest / insurance
    ** Drives less than 8k annually if that matters for

——- read below if you got time ——-

My own understanding of each below,

1 - novated lease: Their math doesnt add up, good if you’re driving alot, has residual amount, 0 upfront cost, change of employer may be troublesome for rest of the term
2 - finance: rates aren’t the best, some finance wont allow early exit and may attract full amount of interest lost. flexible deposit + residual payment
3 - personal loan: higher rates, slightly lesser insurance, can pay earlier
4 - equity: flexibility to pay earlier without penalties, lesser insurance
5 - all from savings: not much left for a rainy day soon after purchase, lesser insurance, no interest paid

Poll Options expired

  • 55
    Squeeze every last bit of savings and pay all upfront
  • 0
    Dealership finance with residual payment at end
  • 3
    Third party finance with residual payment at end
  • 5
    Personal loan from bank
  • 5
    Use available equity from home loan
  • 4
    Novated lease

closed Comments

  • +6

    Get a cheaper vehicle

    • -1

      A cheaper car would still have those options for purchasing, so not sure how that’s relevant 🤔.

      • +5

        You're not thinking cheap enough
        .

      • +6

        A cheaper car means you will have more left over in your savings for a rainy day.

        • But,but,what if it never rains?Therein lies a problem.

          • +1

            @Hackney:

            what if it never rains

            With my luck in life, it won’t just stop at rain. 🥸

            • +1

              @kaleidoscope: Well if you know that, dont buy any expensive car.

              More it costs the more you have to eventually pay.

              ie if you gamble with a $100 bet, you'll lose more than a $10 bet if you are "unlucky"
              Or if you expect to ruin your suit in the rain, use an old suit

  • Buying second hand is usually good idea but due to covid19 and bushfire/hail recover prices are bad.

    • +2

      Yeah with covid the 2nd hand market is also bery inflated.

      • Yeah I should have made myself clearer - bad = inflated (good for sellers, bad for buyers)

  • +2

    Save till you have the necessary readies. Negotiate best price by going to several dealers telling each dealer what the cheapest price you got from the previous dealers. Ask them to beat that price. (doesn’t always work.)

    Rinse and repeat till it does and you get price you know is rock rock bottom and have had few extras (like full tank gasoline on delivery- free roadside breakdown and assistance insurance -free car washes- mud guards- whatever -ETC.)thrown in for free. Then pay all upfront.

    • +2

      Or you could be up front and tell the first sales person what you are after and save yourself a day and five strangers two hours.

      This is literally straight from their hand book, the road to the sale

      I want this trim, with these features, for this money

      "Cool, let's price it up and go for a drive while the manager works their magic"

      As long as what you want is profitable, you come back, it's $2k over, "I will check if there are any other bonuses", then it's $500 over "I will go ask the boss if he can do any better", then you shake on $250 over.

      They make you fight for it so you get the adrenaline from a win. And if you don't fight, they might make 10% of this sale instead of 5%.

      If they can't do that deal, or suck at their job, they let you walk.

    • +1

      Gasoline, lol

  • +2

    Bad time to be buying a car used cars have gone though the roof

    • +1

      But why is it a bad time to be purchasing a new car when resale is excellent?

      • By the time you come to sell a new car bought now(which depending on model, could have a 6+ month wait ), the used car market won't/shouldn't be as crazy as it has been for the last 12mths
        Also, current new car prices are pretty much 'take it or leave it' with little to no discounting.

        • Yeap this is true. They don’t bother offering much for the customer as there is enough demand. been to few dealerships and some models have 3-6 month waiting

          • @kaleidoscope: This is essentially it, you're not going to get a bargain in this market. I wouldnt ever buy a car on finance jazz it up all you want it is by far the most expensive option.

            Novated lease is a scam 90% of people would end up worse or no better off on one so dont waste your time - the last time i checked they charged an outrageous 8% interest on the deal it is pretty hard to make it worth your while

            My advice is this, go in the the dealship act like you're unsure if you want to pay via finance but want to assess all your options when you got the contract in-front of you with the final costings on it then when you have the best price (or the best you can get in this market) pay cash. - dont buy new aim for a ex-demo or a car that is MY19.

            You will find most sale men might give you a better 'price' if they think you are paying via their finance options because they get a trailing commission

            • @Trying2SaveABuck: Thanks, yeah just considering all options before I make the final decision.

              Novated lease is a scam 90% of people would end up worse or no better off on one so dont waste your time

              I felt that too. i had a look at their detailed quote. the interest was by far the highest out of other options out there, and their insurance premium is also outrageous (about 2x more than get your own comprehensive insurance with road side) and none of their options are customisable. Only benefit i felt like was 0 down payment.

  • What’s the budget? It makes a difference if you are buying a new Haval vs a new land cruiser.

    Using cash savings may not incur ‘no interest’ if you are using money that would otherwise be offsetting a mortgage.

  • If you’re going with any type of finance - there’s a cost to doing that of course. If you have the funds then they must be invested and earning more than the interest you’ll be paying. Probably easier just to be paying upfront.

  • +2

    Unless you can claim tax deductions then just pay up front.

    • certain amount I can, but not as much as a company car nor the gst.

      • Then just buy it and bask in the freedom you have not having to pay interest on the loan. :)

  • +4

    Friends don't let friends take out car loans.

  • Cheap 2nd hand car for cash

  • Where’s the loan shark option?

  • +5

    Novated leases save you tax. Unfortunately all you save in tax is largely swallowed as profit by the novated leasing company who may get very nasty if you press them for how their finance is actually calculated. In the end, if it costs the same to me, I would rather pay tax than give a finance firm profit, at least taxes go towards helping society.

    A car is a depreciating asset. That's fine if you need it to make money (becomes capital in this case) but in most cases a better car doesn't improve your earnings. So then you can't justify getting a loan.

    That leaves you using savings. Only buy what you can afford. And keep some savings for a rainy day because you don't want to be forced to sell the car (which will be worth less in the future) to pay an urgent debt.

    Moral of the story: you probably don't need as good a car as you wish for.

    • Unfortunately all you save in tax is largely swallowed as profit by the novated leasing company who may get very nasty if you press them for how their finance is actually calculated.

      Yes. This is why I said their math doesnt add up. The amount I loose in take home salary with all the tax benefits is more with novated lease as opposed to diy finance + running costs without tax benefits. I asked them for a detailed quote breaking down all the expenses for comparison.

      Moral of the story: you probably don't need as good a car as you wish for.

      Yeap! Not going for a luxury vehicle or a vehicle that I pay more for the badge :-) (but i don’t quite like korean brands though, but maaan they give 7yr warranty 🤯)

  • +2

    Do you even need to buy now?

    Can you wait 12 months?

    • I won’t have a need for one till 6-12 months from now. Why I’m doing it now is because there is a wait for 3-6 months or even more for an order placed right now. So I’m trying to get the purchase options sorted out to place deposit (500-1000) for a vehicle that is 6 months away. If by then the prices are lot improved with discounts I can either re negotiate or even throw away the deposit for a much better deal. Either way will definitely need one in 6+ months from now.

  • +4

    pay most of it with savings and some portion with finance so there's money left in the bank.. also wait until the end of the year when the market returns back to normal

    • 🙌

    • end of the year when the market returns back to normal

      will this happen

      • No idea. I would hope so, but it hinges a lot on international travel I reckon.

  • +3

    I would suspect the best way is if you have some colateral…. if you own your own property or have a mortgage you should be getting better rates.

  • Paid in cash upfront is the only way I would buy a car, and it would be a used top of the line model around 3-5 years old. Get another ~7 years out of it, sell and rinse and repeat. Now is not a good time to be buying cars, prices are through the roof and stock is limited.

  • +1

    Drives less than 8k annually =(~25km per day)

    just buy an old corolla/lancer/pulsar for around $3000 from savings

    • as much as i would love this, try finding one that isnt a crapbox owned by 5 guys who used them as ubereats shitters

      then think about how much time you're going to mess with getting it fixed

  • +1

    We saved and paid via money order/cheque from bank.

  • I would not be throwing away money on interest or fees, and I would not be scrabbling to deplete my emergency funds to pay for it either. Cash and only if you have sufficient funds to cover the full cost AND still have a decent buffer.

    • yeh but you have to be realistic about peoples situaitons

      if you have a decent car already, KEEP IT and wait it out

      there's no point buying something new to scratch an itch

      there may be people who just have an old shitbox who needs good reliable transport

      that's a tough one

      right now, you'd be looking at buying new and modest, that's the reality, I havent seen much of value in any 2-3-5yr old lightly used car

      further to buy even a basic new auto hatch youre looking at $25k

      anything less and you're messing with chinese or subcompacts

      If you have a mortgage or pay rent or have kids then good luck trying to scrape together $25k cash… or even $15k for a china shitter.

      I have that but I'm sitting it out. I have that amount because I've been in constant work for the last few years, even thru covid and I havent been buying much except the usual crap off this place like $50 mech keyboards and all excess cash goes into my offset/mortgage.

      But yeah. I dont see a huge deal with getting a loan based on your mortgage but at 5.5%? 6.0%???? eh thats a lot for a depreciating asset

  • Thanks all for the input. I think the popular opinion is very clear.

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