If you're already in debt, adding a car loan to the pile could create problems if it means you might struggle to meet all your monthly payments on time. But sometimes, there's no avoiding it.
Here are questions to ask yourself and steps you should take before making the big decision.
Do you really need a car?
If you live somewhere that's well served by public transport, you should consider whether you even need a car at all. Paying for a monthly travel pass works out cheaper than most loans, and you'll avoid the traffic at rush hour too.
Carpooling could be another option if you live close to a co-worker, especially if public transport isn't adequate for getting you where you need to be.
Buy or lease?
If you decide that you do need your own vehicle, you don't have to buy it outright. Leasing a car is a popular alternative that has a number of advantages, not least the ability to drive a better model of car than your buying budget would stretch to. You'll also be able to upgrade to a newer vehicle when the lease ends.
While leasing can be a practical alternative to buying in the short term, it's less cost-effective than a car loan as a long-term solution, especially as you won't have anything to show for it at the end.
New or used?
If you're in debt and worried about the cost of buying a car, there's no question that you should buy used rather than new.
A used car just a few years out of the dealership will already have depreciated in value significantly, despite being the next best thing to the new model. Buying a used car from a reliable brand can also be wiser than buying a new model from a less reputable manufacturer that might cost you more in fuel and services over time.
Learning what to look for in a car or bringing a petrolhead along will help you cut through the sales patter and find the right car for your needs.
Compare car loans
As well as comparing cars for sale, you should also compare car loans. Many dealerships offer their own car finance packages, often with special offers that can seem tempting, but these could end up costing more in the long term. You should shop around from other loan providers to find an interest rate and monthly payment you're happy with.
Like any loan, it's a good idea to choose the highest monthly payment you're comfortably able to afford, as this means your loan will be paid off faster and you'll lose less to interest overall. Car loans are usually more favourable than an unsecured personal loan, as the car itself acts as collateral.
If you're worried about your credit score or you've been turned down for a car loan in the past, Debt Fix could help. Call us on 1300 332 834 for a confidential, obligation-free consultation and to find out what your options are.