Written by Kodie Axelsen
Upgrading your car is super exciting! And let’s face it, it generally isn’t a cheap thing to do. There are so many decisions to make along the way. When deciding to buy a new vehicle or a used vehicle there are a few things to consider. When buying a new vehicle, a lender will view this as more of a low-risk transaction and you will receive a more competitive interest rate on your car loan.
When buying used the interest rate will generally be higher and even higher again if you are buying from a private seller.
There are many things to consider when buying a vehicle. New vehicles come with warranty, some up to 10 years which is a bonus if maintenance and repairs will be a big outlay for you in the future. If buying used, keep in mind you can transfer warranty and maintenance into your name, so it still applies to you if you buy a car privately.
There is an age old saying that when you purchase a new car it drops in value the second you drive it out of the showroom, but we have seen changes in the recent car market where second hand Land Cruisers are selling for more than they were purchased for new.
The wait for new cars has driven up the price of used cars and created a supply and demand issue. This is definitely something to consider when purchasing your next car. You may be willing to wait for new one or you may require a vehicle quickly and cannot sustain the six-month wait time therefore have to buy used.
Financing a new vehicle is a much easier and cheaper process from a lending perspective. You avoid higher fees, higher interest rates and the larger paper workload.
Buying new can also satisfy your need for upgraded technology in your vehicle and better safety ratings. You gain warranty, maintenance packages and all of these costs including your stamp duty can be financed into your loan to make for streamline process from start to finish. There are a lot of pros to purchasing new buy you will “generally”(I say that loosely given the recent car market) pay a higher price for a new vehicle than buying the older model.
When choosing to finance a vehicle you are buying privately it is helpful to understand that there are some hoops to jump through with the lenders. There are policy guidelines and private sale conditions that have to be adhered to.
The age of the vehicle will depend on whether it can be financed under a car loan and therefore gain a cheaper interest rate. If the car is too old, you then have the option of a personal loan which is generally a higher interest rate. Due to money laundering laws, there is a list of documents that are required from the seller.
It is helpful to let them know you are financing the vehicle and the payment process may take slightly longer than if you were paying cash. If dealing with a broker likes us, we will deal directly with the seller.
It is our job to keep them informed through the process to keep the sale running smoothly. No one wants to miss out on their dream car due to a seller misunderstanding of the sometimes-lengthy process, especially if there are cash buyers lined up ready to go behind you.
So do not fear as we are here! There are background checks that need to be done on the vehicle and the sellers and we will take care of all that process for to make sure your purchase is 100% legitimate and a safe transaction.
It is also handy to know that when transferring registration, you will have to pay stamp duty on the vehicle. This cannot be financed in a car loan and will have to be paid for out of pocket.
When using a personal loan to purchase your car you can account for the stamp duty and include this amount in your total loan to reduce your out-of-pocket expenses.
Whether going new or used there are a lot of options out there and there are a lot of things to consider. If you are wanting some guidance on what way would work best for you, please get in touch with our office and we will be more than happy to walk you through the options and the costs associated with them. After all an informed decision will always make the best one!