How To Get A Car On Finance?

October 6, 2023

Are you one of those dreamers who’s had their heart set on that shiny, sleek, and appealing car that’s been making your pulse race every time you pass by the dealership?

We’ve all been there, envisioning ourselves behind the wheel, the wind in our hair, and the open road ahead. But let’s be honest, cars aren’t exactly pocket-friendly, and most of us can’t just stroll into a dealership and write a fat cheque for our dream ride.

So, what’s the solution? Mad Man Finance!

Getting a car on finance can be a game-changer, making that dream car parked in your imagination a tangible reality. But here’s the kicker: car finance isn’t a one-size-fits-all deal. It’s an entanglement of options, terms, and decisions, and navigating it requires a map of knowledge and a compass of insight.

In this blog post, we will take a look into how to get a car on finance. We’ll explore the different options and provide you with the vital information you need to make this exciting journey a successful reality.

So, fasten your seatbelts, and let’s dive into what’s involved in getting a car on finance!

What is Car Financing

What Is Car Financing?

Car financing refers to taking out a loan to purchase a vehicle and making repayments over a set period. Essentially, it is a way to break up the cost of a vehicle into smaller, more manageable payments.Β The loan agreement typically includes interest rates and fees, which can vary from lender to lender.

Car financing options are available from banks, credit unions, and other financial institutions. However, shopping around and comparing loan offers is important to secure the best deal for your unique financial situation. Doing so can save you a significant amount of money in interest and fees over the life of the loan.

What are the Different Types of Car Financing

Different Types Of Car Financing

Personal Loans

Personal loans are a popular type of car financing as they provide the borrower with enough funds to purchase a vehicle outright without the need for collateral. This means the borrower does not have to risk assets, such as their house, as security.

One of the primary benefits of a personal loan is that it is unsecured, which implies less risk for the borrower but more for the lender. As a result, individuals with good credit scores are more likely to be approved for personal loans. However, obtaining approval or a better interest rate is sometimes easier by applying for a loan secured against your collateral. The disadvantage of a secured loan is the possibility of losing the car if repayments are not met.

Before applying for a personal loan, it is advisable to compare the rates and terms offered by different lenders to determine the best deal. This is where credit brokers like us come into play. We help you compare loans for free, without affecting your credit score, and assist you in finding a deal that is tailored to your needs.

Personal Contract Purchase

In contrast to traditional car financing, PCP doesn’t require you to purchase the car outright. Instead, you start by putting down a non-refundable deposit that goes towards the vehicle’s total price. The remaining amount is then financed through a loan that you repay with interest and the cost of depreciation over a set period.

At the end of the PCP agreement, you have three main options. You can choose to pay the remaining value of the car minus your deposit, trade it in for a new one with a new PCP contract, or simply return it. When returning the car, as long as you have kept within the terms of the agreement and haven’t damaged the vehicle, you won’t pay anything else.

People who prefer changing cars regularly usually use PCP loans due to their flexibility. It allows them to upgrade or downgrade their vehicles with minimal hassle. The financing offers lower monthly payments than traditional financing methods since you’re not paying the entire vehicle price. However, these loans also tend to have higher interest rates and penalties for exceeding mileage allowances or damaging the car.


Car leasing is a financing option that allows drivers to use a vehicle without owning it. Instead, they make regular payments for the duration of the lease agreement, usually based on factors such as car value, lease term, and mileage allowance.

Leasing tends to result in lower monthly payments than car financing through a loan, making it an affordable solution for many drivers. However, there may be additional costs to consider, such as an excessive wear and tear fee if the car is returned with damage. It’s important to factor in additional expenses, such as insurance and gap coverage, which some leasing companies may require.

One of the key benefits of leasing is the ability to drive a new car every few years without worrying about long-term ownership or depreciation. This can particularly appeal to drivers who enjoy their cars’ latest technology and safety features. Leases also generally come with a manufacturer’s warranty, providing added peace of mind.

It’s worth noting that leasing agreements can be restrictive in terms of mileage limits and vehicle usage. Drivers who exceed the agreed-upon mileage or cause significant damage to the car could face costly penalties.

Hire Purchase

Hire Purchase offers a more traditional route to owning a vehicle compared to the newer Personal Contract Purchase (PCP) scheme. With Hire Purchase, you will deposit the car and then pay off the remaining balance in monthly repayments (plus interest) over an agreed timeline – usually one to five years.

It’s crucial to note that you only own the car once you pay the final payment, known as the “transfer fee” or “option fee.” Until then, you can’t sell the car without the lender’s permission. The transfer fee is typically minimal, but it’s a crucial sum that transfers car ownership to your name.

What’s great about a Hire Purchase is that you don’t have to worry about depreciation or mileage limits, as you would with a Personal Contract Purchase. The deposit you make at the beginning of the agreement helps to lower the monthly repayments, making it an affordable option for many people.

It’s also worth noting that with Hire Purchase, the lender is named the car’s legal owner until all payments have been made. This means that if you can’t keep up with your car loan repayments, the lender has the right to reclaim the vehicle, which could impact your credit score.

Pros and Cons of Car Financing

Pros and Cons of Car Financing


Afford a better car: Car financing allows you to spread out the expense of buying a car, meaning you can afford a better car than if you were to pay for it upfront.

Credit score: Regularly paying for your car financing can improve your credit score, showing you are reliable and can make timely payments.

Ownership: At the end of the financing term, you own the car outright and can keep it, sell it, or trade it in for a new one.

Build savings: Financing a car can help you build up your savings, as you don’t have to pay the car in full upfront.

Fixed payments: With car financing, you have fixed monthly payments, which can be easier to budget than large lump sum payments.


Monthly payments: While fixed monthly payments can be helpful for budgeting purposes, they can also be expensive and eat into your monthly income.

Risk of financial damage: Borrowing money to finance a car means taking on debt, which may damage your financial situation if you cannot meet your monthly payments.

Depreciation: Cars lose value over time, and financing a car means you will have a depreciating asset worth less than what you paid.

Commitment: With car financing, you are committed to paying for the car for a set term, which can be a disadvantage if you want to change cars before the end of the term.

Interest rates: Car financing typically involves paying interest on the money you borrow, which can increase the overall cost of the vehicle.

Steps Involved When You Want to finance a car in Australia

Steps To Finance A Car In Australia

Buying a car is a significant financial decision that requires careful planning and consideration. Here are the steps to follow to get a car on finance:

Determine Your Budget

The first step is to assess your finances and determine how much you can afford to spend. Consider your monthly income, expenses, and financial commitments to figure out an affordable payment plan. This step ensures that you avoid overextending yourself financially and ending up with a car you cannot afford.

Check Your Credit Score

Your credit score plays a significant role in the financing terms that you’ll be offered. A higher credit score could get you better interest rates and more favourable loan terms. Obtaining a copy of your credit report and checking for errors is essential. Before applying for car financing, take the necessary steps to improve your credit score.

Research Your Options

Research different dealer finance options, such as auto loans and car leases. Understand the differences between these options and identify the one that aligns with your requirements. Auto loans typically involve borrowing money from a lender to purchase a car. In contrast, car leases entail leasing a vehicle for a specified period and returning it to the dealership once the lease ends.

Shop For Lenders

Before one applies for a car loan, it is good to look for lenders that offer competitive interest rates, loan terms, and fees. Options include banks, credit unions, and online lenders. You can also check dealership financing options. Comparing lenders allows you to identify the most favourable terms for you.


Getting pre-approved for a car loan before shopping for a car places you in a better negotiating position. Pre-approval lets you know how much you can borrow and the interest rate you qualify for, simplifying the negotiation process. Having pre-approval also saves time and effort in the purchasing process.

Find The Right Car

Look for a car that fits your budget and meets your requirements. Whether new or used, compare prices, features, and warranties. Also, consider factors like fuel efficiency and maintenance costs. Understanding the car market and identifying the best car for your money is essential to ensure you get value for your investment.

Negotiate The Price

It’s essential to negotiate the price of the car with the seller or dealership while staying within your budget. Remember to account for taxes, registration, and insurance costs. Being a good negotiator can save money, making the car more affordable.

Read And Understand The Financing Terms

Carefully read and review the financing terms, including the interest rate, loan duration, and monthly payment amount. Feel free to ask questions if anything needs clarification, and ensure you are comfortable with the terms. Avoid getting into agreements that you do not understand.

Complete The Application

After accepting the financing terms, complete the loan or lease application with comprehensive financial details. Be prepared to provide documentation to support your application, such as proof of income and employment. This information helps the lending institution assess your creditworthiness and the risk associated with your application.

Review And Sign The Contract

Once your application is approved, review the contract thoroughly and ensure all terms are agreed upon before signing. If you’re leasing, understand any mileage limits and lease-end options. Ensure that you read the fine print to avoid any hidden charges.

Make a Down Payment

If required, make the down payment on the car. The down payment size can affect your monthly payments and interest rates. The larger the down payment is, the lower the monthly payment and interest rate.

Take Delivery of The Car

You can take possession of the car after signing the contract and making the down payment. Ensure you receive all necessary documentation, including the title and warranty information. Check the car for any defects or issues that may require attention.

Tips for Successful Car Financing

Tips For Successful Car Financing

Pay Any Additional Dealer Fees or Extra Fees in Cash

When buying a car, some dealers may tack on additional fees, such as documentation, delivery, or advertising fees. These fees can add up quickly, so it’s best to pay them in cash to avoid having them rolled into your financing and increasing the overall cost of the car.

Keep the Term As Short as You Can Afford

While a longer loan term may lead to lower monthly payments, it also means paying more in interest over the life of the loan. Try to find a loan term that fits your budget while limiting the amount of interest you’ll pay.

Know Your Credit Score Before Shopping

Your credit score significantly determines the interest rate you’ll receive on your car loan. Knowing your score beforehand can help you shop around for the best rates.

Consider GAP Insurance (Guaranteed Asset Protection Insurance)

GAP insurance covers the difference between what you owe on the car and its actual cash value in the event of a total loss, such as theft or an accident. This can be especially helpful if you put down a low down payment or have a longer loan term.

Strive For a High Down Payment

Putting down a higher down payment can reduce your monthly payments and the amount of interest you’ll pay over the life of the loan. It can also help you get approved for a loan if you have a low credit score.

If You Do Have a Low Credit Score, Get Financing Quotes

While a low credit score may make securing a loan more difficult, finding financing options is still possible. Shop for quotes to compare interest rates and terms to find the best deal.

Frequently Asked Questions on Car Finance

Is it Better to Buy or Lease a Car When Financing?

Owning a car means having complete control over mileage and the ability to modify or personalize it as desired. Purchasing a car allows for a more accurate idea of costs, as there are no limits on the amount of wear and tear that can accrue over time.

In contrast, leasing a car can provide convenience and flexibility, but the lack of ownership can be a drawback. Furthermore, the leasing process often involves strict mileage limits and penalties for excessive wear and tear, and returning the car may involve added fees and unnecessary hassle.

That said, buying or leasing a car depends on your needs and financial situation. However, purchasing a car is generally the way to go if you’re looking for a long-term investment that gives you complete control over your vehicle.

Can I Get Car Financing With Bad Credit?

Absolutely! Although a lower credit score may limit your options, car financing options are still available to you if you have bad credit. In fact, making a down payment on a car can increase your chances of being approved for an auto loan. However, it’s important to note that having bad credit may result in higher interest rates and fees.

Some lenders may require a cosigner or collateral to approve your loan application. It’s also essential to research and shop around for the best car financing options available. Many reputable lenders offer bad credit car loans, so don’t let your credit score hold you back from purchasing the vehicle you need.

What is The Average Interest Rate For Car Financing?

Based on the information provided, the average interest rate for car financing in the second quarter of 2023 differs based on whether the car is new or used. The average comparison rate for new cars is 6.63%, while for used cars, it is 11.38%.

It’s important to note that interest rates can vary based on individual credit scores, loan length, and the specific lender. These rates are averages and may not apply to every car purchase.

How Long Does The Car Financing Process Typically Take?

Typically, the car financing process can take anywhere from three hours to ten business days, depending on the type of lender being used. It’s important to note that different lenders have varying approval processes, which can impact the timeline for obtaining financing.

Can I Refinance My Car Loan Later For a Better Interest Rate?

Yes, it is plausible that you can refinance your car loan later to secure a better interest rate. Refinancing involves taking out a new loan to get a car loan with more favourable terms. It can be an effective way to reduce your monthly payments or lower the interest you pay over the life of your loan.


Investing in a car can be a big decision. It is important to understand your financial options before making any commitments. You should do your research, compare the options, and find out which one is best for you. Consider speaking with local car dealerships for more information on finance choices and to get advice that is tailored to your specific needs.

If you’ve ever thought that car financing is daunting and uncertain, let us assure you that it doesn’t have to be. Mad Man Finance has established itself as a beacon of excellence in the automotive industry, and we excel in guiding our clients through the maze of car financing.

When you choose Mad Man Motors, you’re not just purchasing a car but investing in a seamless and rewarding car financing experience. Whether you’re a first-time buyer or an experienced car enthusiast, we have the expertise to make your dream car a reality.

Don’t settle for anything less. Choose excellence, guidance, and Mad Man Motors for a car financing experience that’s second to none. Your dream car is closer than you think, and Mad Man Motors is here to make it happen. Get ready to hit the road in style and satisfaction!

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