Cars are a necessity in the eyes of many. In today’s hot car market though, many prospective car owners are looking at the smartest, most affordable way to finance their next car purchase.
Finding the right funding option for a car is even more important if you have bad credit.
We help you put the wheels in motion on deciding whether buying or leasing a car is the better option for you.
Is a finance lease on a car the same as buying a car?
While a car lease and buying a car outright will both result in some shiny new wheels in your driveway, they are, in fact, not the same thing. To put it simply, the difference between buying and leasing a car can be likened to the difference in buying vs renting a home.When you purchase a home, you take out a mortgage (or, if you’re fortunate enough, you purchase it outright). On the other hand, renting a home is making monthly payments to live in a home that someone else owns. Car leases operate in much the same way, where you make a monthly lease payment to drive a car that a financier purchases on your behalf over a set period of time.
How does leasing a car work?
Car leasing is a funding option offered by a finance company that specialises in vehicle leasing. A car lease allows the costs of the vehicle to be ‘bundled’ into one payment, including expenses like insurance and fuel.A lease term may range anywhere from one year to five years. You make lease payments over your chosen term, often with a residual amount still owed on the car at the end. Most lease companies will offer flexible contract terms.
There are generally three different car leasing options:
1. Novated leases
If you’re an employee, a novated lease may be available to you; this is where the lease agreement is between you, your employer and a finance company. Leasing cars this way doesn’t necessarily mean that you need to use the vehicle for business purposes — a novated lease car can be used entirely for personal use. At the end of the lease, you can pay out any residual amount (called a balloon payment) or return the car to the leasing company.Novated leasing takes some (or all) of the lease payments from the employee’s salary, which means there can be some tax benefits to salaried employees who take out a novated lease.
2. Finance leases
A finance lease is usually for cars that are for business use. Under this leasing option, the person leasing the vehicle is required to either pay out the residual value at the end of the lease, lease the car for a further lease term, or purchase the leased car from the company offering the lease.3. Operating lease
Similar to a finance lease, an operating lease is for businesses that purchase vehicles for their employees to use. Unlike a finance lease, however, at the end of the lease period, there is no obligation to pay out the residual amount and the car can be handed back to your employer. The pros of car leasing
There may be many upsides to using a car lease; they include:
- Access to tax benefits such as being able to claim tax deductions or reducing an employee’s taxable income to attract less income tax payable.
- All of the running costs, such as operating costs, maintenance costs, insurance and finance repayments, are all bundled into one payment, which can make budgeting for a car easier.
The cons of car leases
Some of the downsides to car leases, however, include:
- There could be driving restrictions imposed on a lease car, and you may not be able to modify the car during your lease period. This is because a lease works on the basic premise that the borrower rents the car the lender owns.
- If you have a novated lease or finance lease, you’ll need to save money to pay out the residual value at the end of the lease period.
- Leases are generally only available to employees of a business or company. This makes them hard to access if you’re self-employed or receive Centrelink benefits.
- A portion of your monthly repayments does include interest charges. Similarly to personal loans, you pay interest on the purchase price of the car.
- The total cost of the car, when you consider the full lease repayments and balloon amount at the end, may be the same, if not more, as buying a car outright — even if you use a personal loan to do so. (There also may be a deposit required to secure the lease).
Can I get a car lease with bad credit?
Getting a car lease isn’t as simple as signing a new lease and driving away. A lease application still relies on passing a credit check.How can I buy a car with bad credit?
Car ownership comes with a level of responsibility. If your credit history paints a picture of financial irresponsibility, then it may be hard to access the finance you need to purchase your new vehicle.Car finance with bad credit
Thankfully, at Finance One, we may offer vehicle loans to everyday Aussies with bad credit who need a second chance at borrowing money.Provided that you:
- Are at least 18 years of age.
- Are looking to borrow between $5,000 and $25,000.
- And have regular income.
We can look to help get you the finance you need for a new car — even if you have defaults on your credit history or a poor credit score.
Getting the best deal on a car is an exciting feeling, imagine getting the best deal with a lender that looks past your bad credit and works with you to access the finance you need! Contact the team at Finance One to learn more about vehicle loans with bad credit and how we can help you get behind the wheel of a new car.Apply Online Now
Content prepared by an external writer covering topics that may be of interest to our customers. The content does not necessarily represent the views or opinions of Finance One.
All loan applications subject to normal lending criteria. Fees and charges payable.
Disclaimer: The information above is of a general nature only and does not consider your personal objectives, financial situation or particular needs. You should consider seeking independent legal, financial, taxation or other advice to check how the information relates to your particular circumstances. We do not accept responsibility for any loss arising from the use of, or reliance on, the information.
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Fin One Pty Ltd – ABN: 80 139 719 903
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