How to fund a family car upgrade

There comes a time in family life when no amount of packing tetris can negate the fact that it’s time for a new car. Whether your last road trip was one elbow-in-face too many, or you’ve got a new arrival on the way, upgrading your family vehicle is a big life step – and a big financial decision too. Here are our top tips on funding a family car upgrade, so you can get the space you crave.

Choose your car budget carefully

Deciding how much to spend on a car is a big decision that requires research. Explore what you can get in different price brackets, compare new and second-hand models, and remember to factor in things like warranties and fuel consumption. While a car might be cheaper upfront, it could cost you more in the long run if it experiences maintenance issues or uses substantially more fuel. Give your budget some serious thought, and consider your short- and longer-term goals, too.

Decide how you’ll pay for it

When it comes to funding your car purchase, you have a few options.

Save up over time

If you can manage with the car you have for a while longer, you might opt to save up for your car purchase over time. Setting yourself a goal and a target ‘new car date’ can help you stay accountable and reach your goal faster. Setting aside a set amount from every payday towards your car purchase can really add up. Plus, in a high interest savings account, your money can work even harder.

Unlock equity in your home

If you have equity in your home, you may be able to access some of it to fund your car purchase by refinancing. Generally, usable equity is calculated at 80 per cent of the property value, minus the loan balance.

A free Home Loan Health Check can give you a comprehensive overview of the opportunities available to you through refinancing. You might just find you can unlock the funds for your new car sooner than you thought.

Take out a personal loan

If you need a car quickly and you don’t have a lump sum spare, a secured personal loan could be for you. Your car is used as the collateral security for the loan, and you can choose a range of repayment options and frequencies. You can even pay it back sooner if your financial situation changes. However, it’s important to consider how loan repayments will impact your household budget.

Novated leases

A novated lease can be a tax efficient way to upgrade your family car. This involves making repayments through your employer via a salary sacrifice arrangement. Speak to your employer about whether they offer this type of funding.

Don’t forget to consider indirect costs

Buying a new car is exciting, but this means we’re at risk of making decisions emotionally rather than rationally. The extra costs of cars can start before you’ve even driven off the forecourt, so be wary of upsells, extra features and finishes, and ongoing running costs before you commit.