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3 ways to pay for your car

3 ways to pay for your car

Whether you save, borrow or use dealer finance, getting the keys to a new car may not be as challenging as you think.

Once you’ve found the right car and looked into all the associated costs involved in buying it, you should have a good idea of how much you’ll need to pay all up. You then have three main options for financing your new wheels: save, borrow or dealer finance.

Saving for a car

Waiting until you have enough money to buy a car outright takes time, but if you do you won't have to pay any interest once you've bought it.

Having a separate savings account can help you to stay disciplined and motivated with your savings. Our Budget Planner Calculator can help you work out how much you can set aside to save each month, and our Savings Calculator can help you figure out how long it will take to reach your goal.

Borrowing for a car

With a personal loan you can buy your car now and pay it off in instalments. Use our borrowing calculator to see how much you may be able to borrow and what your repayments will be. 

If you’re buying a car that isn’t more than five years, old you may be able to take out a Secured Car Loan. By using your car as a type of security, you can borrow the funds you need at a lower interest rate than an unsecured loan. You can even get pre-approval for this type of loan, giving you up to 30 days to find the right car within an approved loan amount.

The more you can save before taking out a personal loan the less you’ll have to repay, so it’s a good idea to still put some money away beforehand if possible.

Dealer finance

Car dealers often offer finance as a means to buying a car. If you’re considering this option, there are a few things you should ask the dealer:

  • 'What's the interest rate?' Compare the rate the dealer may be offering through dealer finance with the comparison interest rate of a personal loan to check you're getting the best one.
  • ‘Is there a balloon payment at the end of the loan?’ The loan repayments may seem cheap, until you realise you face an additional large lump sum when your loan term is up.
  • ‘Is the price of the car negotiable?’ It often isn’t with dealer finance. 

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Applications for finance are subject to the bank's normal credit approval. Full terms and conditions will be included in our loan offer. Fees and charges are payable.