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Cash or Finance for car?

Discussion in 'General Property Chat' started by Propertyman, 14th Sep, 2016.

  1. Propertyman

    Propertyman Active Member

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    HI guys,

    I’d be interested to hear how you guys went about buying your car? Do you pay cash or take out a loan?

    I’m due for a car in the next 6 months and want to know the best way to go about it without it massively impacting my serviceability. The trade in on my current car will be minimal and I have around $25,000 in an offset account so not sure whether to pay cash or not.

    Thanks in advance
     
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  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    I paid cash for mine - if servicing is an issue, chat to you broker and they'll see how much it would impact things for you.
     
  3. wombat777

    wombat777 Well-Known Member Premium Member

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    Definitely cash.

    I paid out a novated lease last year so I could improve my serviceability.

    Some cars depreciate less than others. Consider that when buying.
     
  4. radson

    radson Well-Known Member

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    Why due?
     
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  5. Propertyman

    Propertyman Active Member

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    Thanks for the replies. I'm due because I have begun to have car troubles with my current one and my mechanic thinks there will be more to come.

    So cash even though it would mean less in the offset and more interest?
     
  6. Brady

    Brady Well-Known Member

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    Vehicle loans have large impact on serviceabilty, due to combination of higher rate and loan term.

    Not sure what your equity position is like - could take out equity loan and purchase vehicle on long loan term (could always pay it back like a 2-5 year loan term, but as it would be based on 25-30 years the minimum repayments are very low, which would result in minimum impact on serviceabilty).

    Otherwise could payoff PPOR debt (if you have any) and redraw the funds back out, split and have seperate loan (not sure if your personal details if loan would be deductable) - but again would have minimum impact on servicing and gets you a seperate loan thats not mixed.
     
  7. citystar

    citystar Well-Known Member

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    I always pay cash for motor vehicles for two reasons. First they depreciate in value and the second and most important reason is that the loan would affect serviceability too much.
     
  8. Sonamic

    Sonamic Well-Known Member

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    Cash. Unless you need a credit rating. Why pay 35k (including interest) for a 25k car that's only going to be worth 15k at best at the end of the loan. Just buy a 10k Toyota Corolla with cash and be done with it. Ego cars can come later when you have the $$$ to back it up from better invested funds now. :p
     
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  9. neK

    neK Well-Known Member

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    Easy. Keep the existing car, pay out any debt.
    Due or Want. That's what you need to differentiate.

    If you have to ask how you can do it without impacting your serviceability, then its not the right time to be buying a new car.
     
  10. SOULFLY3

    SOULFLY3 Well-Known Member

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    Is serviceability hit if the new ute is thru the business?
     
  11. Redom

    Redom Mortgage Broker Business Member

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    If looking to borrow from banks - pay cash or do what @Brady suggests and potentially use home equity (split out).

    If financed via personal loan/leases, banks will insert your repayment amount into servicing calculator. Due to the shorter loan terms and higher interest rates (usually), the monthly repayment amount on cars are relatively high compared to their actual value.

    As a general rule of thumb, if you have a $1000 p/m repayment, it will reduce your borrowing power on your next loan by $140-150k. This will compound further if you extrapolate its impacts on your ability to build a property portfolio.

    For many, the car repayment is the difference between a yes and no for property investing financing.
     
  12. dabbler

    dabbler Well-Known Member

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  13. Blacky

    Blacky Well-Known Member

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    Have your cake and eat it too.
    Get loan approval. Pay cash for the car and then recieve the cash direct from the lender. Buy shares.

    You get a car. Lose the cash, get shares - and have a tax deductible loan.

    Blacky
     
  14. Propertyman

    Propertyman Active Member

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    Thanks for the replies guys. I still want to add some properties to my portfolio so I'll use my cash instead
     
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  15. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    Agree with the general sentiment above - cash for cars.

    Cheers

    Jamie
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Any business use?
     
  17. Propertyman

    Propertyman Active Member

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    Unfortunately no business use
     
  18. jordy

    jordy Active Member

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    Depends really on the type of deal thats out there, Car loans can be had from 3.99% fixed at the moment.

    End of the day your $30k cash is worth half in 5 years time.
     
  19. Colin Rice

    Colin Rice Mortgage Broker Australia Wide Business Member

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    Pay cash where possible and use equity over a 30 year period if no cash available. I have heard people (brokers included) say you shouldn't do that because you will pay bookoo interest blah blah! What they are failing to realise that its flexibility that is important and you can pay that loan out in 2 years or 30 depending on your individual circumstances.

    These things are evil. Refinanced plenty as they can crush your serviceability.

    Is it in your personal name or business name?
     
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  20. SOULFLY3

    SOULFLY3 Well-Known Member

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    [QUOTE=Is it in your personal name or business name?
    Business mate