For many of us, buying a car can be a pretty significant expense! While paying cash is the simplest option, this might not be a possibility for all of us, or you may not want to pay it all at once. According to the AA, finance accounts for approximately 80% of all new car purchases in New Zealand.
So you might be wondering, what’s the best way to finance a car in NZ? Exploring your finance options is critical. At MyFinance, we offer tailored car loans to help you be a cash buyer on the yard.
Main car finance options in NZ
If you want to finance a car, the main options available in New Zealand are:
- Using your savings
- Using a credit card
- Taking out a personal loan or a car loan
Using your savings
Buying your dream car with cash can be the most convenient option if you have some savings. But cars can be pretty costly, and if you are planning to treat yourself, paying cash means you may have to save up for a while before purchasing — and what if you can’t afford to wait?
If you have the means to pay cash now, that’s great, but it’s good to always plan ahead. Make sure you’re not dropping all your savings at once and consider if you’ll be financially secure for a few months after purchasing your new ride.
It can be helpful to create a separate budget for any unexpected expenses that may arise like maintenance and servicing too.
Using a credit card
Many people don’t know that you can buy a car with a credit card. If you have a high enough credit limit and you’re buying from a vendor who accepts credit cards, it works exactly the same way as when you use your credit card for any other purchases.
However, remember that credit card interest rates are typically much higher than car loan interest rates, so you'll likely pay more for your car as you pay off the credit card debt. Check out our blog on Credit cards vs. personal loans to weigh the pros and cons of each option.
Personal loan or Car loan
Buying your dream wheels with a personal loan or car loan is a great way to get into that dream car and without emptying your bank account or savings. It allows you to keep your money in your account and spread the cost of the vehicle over several months or years.
When you finance a car, you usually have a few options:
- Taking out a loan before you get to the car yard
- Getting a loan through the dealership
Buying a car with pre approved loan
Buying a car with a pre approved loan is a great way to ensure you find a vehicle that matches your wants & needs. Getting pre-approval for a loan means you talk to a loan provider like us before you purchase a vehicle, so that you know exactly how much you can spend. You can also act like a cash buyer on the yard, which can help you get better deals because you tend to have more negotiation power as a cash buyer.
When buying a car with a pre approved loan, MyFinance will look at your financial situation to make sure you can afford to borrow the amount you are after. So, we’d recommend waiting until you’ve found the car you like and are ready to purchase or negotiate a price because applying for a pre-approved loan could affect your credit score. You can apply online for a pre-approved loan, and one of our helpful and friendly staff members will contact you to discuss your application.
Buying a car with dealer finance
Dealer finance is simply a fancy name for a personal loan through a car dealer. While it can be convenient for a one-stop shop to purchase and finance your new car, it is always a good idea to shop around.
The rates and fees are likely to be higher as there is involvement from multiple stakeholders when going through dealer finance
I got pre approved for a car loan, now what?
It’s a great feeling once your car loan is pre-approved because it means you’re one step closer to getting your dream car. After you've received your car loan pre-approval, it's time to go shopping and find the car that’s right for you.
Whichever way you choose to finance your dream car, you should carefully consider all the financing options. If you’re unsure, ask your friends or family or seek professional advice from a finance expert. Make sure you understand all the fees and additional costs you may have to pay, along with what happens if you can’t meet loan repayments.
It’s fantastic if you have the money to buy the wheels you’ve always dreamed of. But if you don't, you don’t have to put your dreams on hold – a car loan can be an option to make it work for you.
Don’t forget to check out our quick car loan tips before you take out a car loan with MyFinance or at the dealership. Have a play with our loan calculator and apply now to get into the wheels of your dreams in no time. And if you are a thrill seeker and looking to buy a motorbike, read our guide on buying a motorbike in New Zealand.