Should You pay for your car with cash if you can?

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, updated on September 21st, 2023       

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Many Aussies ask themselves which option is better when it comes to the purchase of a car with cash or financing. Even though there is no universal answer to this question – as each person has a different financial situation, needs, and issues – there are a few factors you should consider before making a decision.

What are the advantages and disadvantages of paying cash?


The main advantage when you choose to pay cash is that you no longer have to worry about future payments. In some cases, if you can’t make your payments in time, you may lose your propriety. Once you have paid cash for your car, you know for sure that this belongs to you. Another advantage is the lack of interest rates, which may cost you a lot. In fact, this way, you will only pay the price of your car.


Paying cash for the vehicle can be next to impossible for some Aussies, but they still strive to go with this option. If you want to pay cash, you may need to cut down on lots of other costs and start saving more money. This way, you can no longer use your cash for other investments. Moreover, if you can’t afford to pay cash but you still do it, you may end up in debt.

What are the main advantages and disadvantages of financing?


The best thing about financing your car is that you are still free to use your money as you wish. You can invest your cash, and choose a loan for your car. Also, you definitely need some money as back up or emergency funds, and if you use it all in order to pay cash, you may end up with no money. Moreover, in some case, it will take years for you to save up enough money for a car, even a used one.

Most lenders offer great interest rates and it usually makes sense to put your cash into an appreciating asset rather than a depreciating one.


If you are already in debt, opting for another loan is undoubtedly a bad idea. In this case, it would be even harder to pay off your debts.

Other disadvantages of financing are interest rates and hidden costs, which may make you pay much more than the real value of your purchase. So pay particular attention to these aspects if you consider a car loan and do thorough research. Furthermore, keep in mind that car loans in Australia are not tax deductible unless you buy the vehicle for your business, or you use the credit for a work-related car.

Overall you will find that financing a vehicle is quite affordable and it makes sense to utilise a loan for a car however make sure that fees and charges are a competitive.

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