
New vs Used Car Financing: Understanding Your Options
Monday, 08 April 2024
Car financing is a common method for purchasing a vehicle in New Zealand, offering individuals the flexibility to spread the cost of a car over time. Understanding how car financing works, especially in the context of new and used cars, is essential for making informed decisions and managing your budget effectively. In this guide, we’ll explore the basics of car financing, how it operates in New Zealand, and the key differences between financing a new car versus a used car.
What is Car Financing?
Car financing, also known as auto financing or car loans, allows individuals to borrow money from a lender to purchase a vehicle. The borrower repays interest on top of the loan amount over a predetermined period, typically through monthly installments. Car loans can be obtained from various sources, including banks, credit unions, and car dealerships.
How Does Car Financing Work in New Zealand?
In New Zealand, car financing operates similarly to other countries, with lenders offering loans to individuals based on factors such as credit history, income, and the value of the purchased vehicle. Borrowers can choose between secured loans, where the vehicle serves as collateral, or unsecured loans, which typically have higher interest rates. You can learn more information about how car loans work by reading our other blog.
Interest rates for car loans in New Zealand can vary depending on market conditions, the borrower’s creditworthiness, and the lender’s policies. Evaluating loan offers from several lenders is critical to identifying the best terms and rates that fit your budget.
Differences Between New Car Financing and Used Car Financing:
When financing a new car, you’re likely to encounter lower interest rates, more lender options, and the possibility of promotional deals. In contrast, the financing of pre-owned cars may carry steeper interest rates owing to the heightened risk linked with vehicles that are older. Additionally, the depreciation rate and insurance costs differ between new and used cars, affecting the overall financial commitment.
Budgeting for Your Purchase:
Before committing to a car financing arrangement, it’s crucial to budget carefully and assess your financial situation. Consider factors such as your:
- monthly income
- expenses
- savings
- and long-term financial goals.
Determine how much you can spare to spend on a car purchase, including down payments, loan payments, insurance premiums, and maintenance costs. Factor in the total cost of ownership, including depreciation, fuel expenses, and potential repairs, to ensure you can comfortably afford your chosen vehicle.
Which one should you buy: New or Old?
When deciding between financing a new or used car, several factors come into play:
Benefits of Buying a New Car:
- Warranty Coverage: New cars often come with manufacturer warranties, providing coverage for repairs and maintenance for a specified period.
- Latest Features: New cars feature the latest advancements in automotive technology, including safety features and infotainment systems.
- Customization Options: Buyers can customize new cars to their preferences, selecting features and accessories that suit their needs.
Drawbacks of Buying a New Car:
- Depreciation: New cars experience rapid depreciation in value during the first few years of ownership, resulting in potential financial loss.
- Higher Purchase Price: New cars typically have higher price tags than used cars, requiring larger loan amounts and higher monthly payments.
- Higher Insurance Costs: New cars often have higher insurance premiums, mostly due to their higher value and repair costs.
- Limited Modification Options: If you are passionate about car modifications, especially for off-roading purposes, buying a new vehicle may limit your customization options. Unlike used cars that may already be heavily modified and tailored to specific needs, new vehicles often require additional time and investment to modify according to your preferences. This not only entails spending money but also considerable time and effort to transform the vehicle into an off-road capable machine.
Benefits of Buying a Used Car:
- Lower Purchase Price: Used cars have lower upfront costs compared to new cars, making them more affordable for budget-conscious buyers.
- Reduced Depreciation: Used cars experience slower depreciation than new ones, helping preserve their value over time.
- Wider Selection: You can find a wide variety of makes, models, and trim levels at lower prices, providing greater flexibility for buyers in the used car market.
- Access to Pre-Modified Vehicles: For enthusiasts interested in car modifications, especially for off-roading, buying a used car presents the opportunity to access pre-modified vehicles that have already been customized to meet specific requirements. Opting for a used off-road vehicle allows you to leverage the modifications and enhancements made by previous owners, saving both money and time. You can acquire a heavily modified and capable used off-road vehicle where someone else has already invested their sweat and resources into enhancing its performance and functionality. This provides immediate access to a vehicle ready for off-roading adventures and eliminates the need for extensive modifications, allowing you to focus on enjoying the thrill of exploration without delay.
Drawbacks of Buying a Used Car:
- Uncertainty About Vehicle History: When buying used, there’s a risk of inheriting undisclosed issues or previous damage, which requires thorough research and inspections.
- Higher Maintenance Costs: Used cars usually require more frequent maintenance and repairs than new cars, potentially increasing ownership expenses.
- Limited Warranty Coverage: Used cars may not come with manufacturer warranties, leaving buyers vulnerable to unexpected repair costs.
Ultimately, whether you choose to finance a new or used car in New Zealand will depend on your individual circumstances and priorities. By taking into account factors such as cost, availability, and personal preferences, you can make a decision that best suits your needs. Remember to prioritize what is most important to you when making your purchase.
Whether you opt for the reliability and warranty coverage of a new car or the affordability and value proposition of a used car, remember to prioritize your financial health and choose a vehicle that fits within your budget. Happy car shopping!
But no matter you need to finance a new car or a used car, Kiwi Car Loans is always here to help you! Apply now and we can help you get approved within one day!
See how affordable your dream is with our calculator
WHAT ARE MY REPAYMENTS?
HOW MUCH CAN I BORROW?
PAYMENT FREQUENCY
OUR INTEREST RATES VARY BETWEEN 9.95% AND 23.00%.
12 MONTHS 84 MONTHS
PAYMENT FREQUENCY
OUR INTEREST RATES VARY BETWEEN 9.95% AND 23.00%.
12 MONTHS 84 MONTHS
*Our fixed interest rates vary between 9.95% and 23.00%, and the rates you receive will depend on your individual circumstances. There is a loan establishment fee starting at $510, a PPSR fee from $7.39, and a monthly administration fee from $2.17. Approval for financing is subject to Kiwi Car Loans' Terms and Conditions, lending criteria, and responsible lending standards.
OUR INTEREST RATES VARY BETWEEN 9.95% and 23.00%
OUR LOAN TERM VARIES BETWEEN 12 MONTHS AND 84 MONTHS
LOANS RANGE FROM $5,000 TO $250,000
LOANS RANGE FROM $5,000 TO $250,000
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