Understanding common car finance myths

Planning to buy a car? If you’re thinking about using car finance, you’re in good company. It’s estimated around 2.4 million Aussies have a car loan, and around 9% of us are planning to buy a car with finance at some point. But taking out a car loan can feel a bit daunting due to the many car finance myths that abound - so let’s demystify these before you go signing any dotted lines.

Myth #1: Paying cash is better than car finance.

There’s no one-size-fits-all answer to whether car finance or cash is a better option, because naturally this will depend on your circumstances. Not everyone has spare piles of cash sitting around - and for a lot of us, regular repayments can actually be the easiest way to pay off a vehicle purchase over time. So, there’s no need to stress if your mattress doesn’t have a crisp stack of 100 dollar notes under it for your next car purchase. There are finance options out there from a range of lenders that might suit your needs.

Myth #2: You can’t get a loan with a bad credit score.

If you have a less-than-perfect credit score, don’t despair. Yes, Aussie lenders need to assess credit suitability to comply with responsible lending requirements. But that doesn’t mean you’re instantly out of the running for a new ride. Don’t call the loan shark just yet!

Reputable and licensed lenders may be able to offer specific conditions, adjust fees, or use the vehicle you buy as security to help you obtain finance. Some can consider other factors like income and employment history. And if you get car finance through Carma, getting personalised quotes for finance won’t affect your credit score.

Myth #3: Rates and fees don’t vary much across lenders.

It’s important to shop around when it comes to car loan interest rates and fees, because different lenders will offer different terms. Even small variations could save you significantly over a year and over the full loan term, so it pays to find the best loan conditions you can. This is exactly why we source quotes for used car finance rates and fees from multiple trusted lenders including Automotive Finance, Plenti, and Wisr. We help you compare different loan terms, with no obligation or hassle.

Myth #4: You can only get car finance for new vehicles.

Plenty of people believe that you can only get a car loan if you buy new. This is not true - and at Carma we can source used car finance options to prove it!

It’s entirely possible to find a modern, pre-loved vehicle with competitive used car interest rates and affordable repayments. In fact - it could be a savvy way to buy, because a lot of new cars can see significant depreciation in the first year or two of ownership. Buying second-hand lets you purchase a late-model car with all the bells and whistles at a reduced price. You could also choose to sell or trade in your current car if you’re looking to bump up your buying power.

Myth #7: You must accept the first loan offer.

You definitely don’t have to accept the first car loan terms you’re offered. In fact, you can stroll away at any time prior to signing an agreement. You can also choose your own lender if you’re buying through a reputable car market like Carma. Never let anyone push or pressure you into a finance deal, and don’t be afraid to take a breather to consider your options.

We know car finance can feel slightly riskier when buying a used car. This is why we cover any cancellation costs if you take out finance with one of our finance partners and decide to return your car within our seven-day return window*.

To summarise...

Have questions about car loans?

Buying a used car online with finance doesn’t need to be stressful now you know about the most common car finance myths. But of course, you might have more questions. If you have any queries about how car financing works or if you’re curious about which modern used cars in Sydney could suit your budget, feel free to give our team a buzz.