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Financing a car can be a smart move, or an expensive one, depending on how you do it. It lets you get a reliable car now and spread the cost, but you'll pay more overall than if you paid cash.
Here are the honest pros and cons, what car finance really costs, and how to decide what's right for you.
Last updated November 2026.
The main upside: you can get a safe, reliable car now and pay for it in regular instalments, without emptying your savings.
The main downside: interest and fees mean you pay more in total than the car's price.
It's usually a good idea when you need a car for work or family, the repayments fit comfortably in your budget, and you choose a car that will last the term of the loan.
It's usually not a good idea when the repayments would stretch you, or you'd owe more than the car is worth for most of the loan.
A real example: a $30,000 car loan over 5 years at 19.95% p.a. is $186.93 a week, including interest and fees.
On a benefit? You may still be able to get car finance, as long as your income is regular and the repayments are affordable.
If you need a car for work, school runs or getting around, finance means you don't have to wait until you've saved the full amount, or settle for something cheaper and less reliable in the meantime.
Instead of one large payment, you pay in regular weekly, fortnightly or monthly instalments that you can budget for.
Paying cash can wipe out your savings. Financing means you can keep some money aside for unexpected bills.
With a pre-approved car loan, you know your budget before you shop, and you can negotiate like a cash buyer, whether you buy from a dealer or privately.
Making your repayments on time, every time, builds a positive repayment record, which can help with future borrowing.
Interest and fees are added on top. For example, borrowing $10,000 over 3 years at 29.95% p.a. means a total of $15,996.24 to repay, including $5,300.54 in interest and $695.70 in fees.
Cars usually lose value over time, so for part of the loan you could owe more than the car is worth. That matters if you need to sell.
See selling a car with finance owing.
You'll be making repayments for the full term, often several years, even if your circumstances change. Choose repayments that will still fit your budget down the track, not just today.
With a secured car loan, the lender has an interest in the car until the loan is paid off. You'll need to sort the loan before you sell, and keep it insured.
|
Paying Cash |
Financing |
|
|
Total cost |
Just the price of the car |
The price plus interest and fees |
|
Savings |
Uses up your savings |
Lets you keep savings for emergencies |
|
When you can buy |
Once you've saved enough |
Now, if the repayments fit your budget |
|
Choice of car |
Limited to what you've saved |
Can stretch to a better or more reliable car, as long as it's affordable for you |
|
Ongoing commitment |
None |
Regular repayments for the loan term |
So which is better? If you have the cash and can still keep a safety net, paying cash is cheapest.
If paying cash would leave you with no savings, or you need a reliable car before you can save enough, finance can make sense, as long as the repayments fit comfortably.
|
Loan |
Term |
Rate |
Weekly |
Total repaid |
|---|---|---|---|---|
|
$8,000 |
3 years |
19.95% p.a. |
$73.19 |
$11,417.64 |
|
$30,000 |
5 years |
19.95% p.a. |
$186.93 |
(monthly: $803.01) |
|
$40,000 |
5 years |
19.95% p.a. |
$247.78 |
$64,422.80 |
Includes interest and fees.
Rates range from 9.95% to 29.95% p.a. depending on your circumstances.
Try your own numbers in our loan calculator.
Yes, you may be able to. A benefit counts as income, and what matters is that your income is regular and the repayments fit comfortably in your budget.
We look at your whole situation, not just your income source.
See our guide to loans for beneficiaries.
Borrow only what you need. Put down any savings you can spare, but keep a safety net.
Choose the shortest term you can comfortably afford. You'll pay less interest overall.
Compare the total cost, including fees, not just the weekly repayment.
Buy a car that will outlast the loan, and get it checked before you buy. See how to buy a car in NZ.
Get pre-approved so you know your budget before you start looking.
For the full process, see our guide to how to finance a car in NZ.
We won't let you get in over your head: we'll go through your budget with you to make sure the repayments fit.
Find out more about responsible lending.
Terms and conditions, and responsible lending criteria apply
It can be, if you need a reliable car, the repayments fit comfortably in your budget, and you choose a car that will last the term of the loan. You'll pay more overall than paying cash because of interest and fees, so borrow only what you need and choose the shortest term you can afford.
You pay more than the car's price because of interest and fees, cars lose value so you could owe more than the car is worth for part of the loan, and you're committed to repayments for the full term.
Mostly so they can get a reliable car when they need it, without waiting to save the full amount or using all their savings, and spread the cost into regular payments they can budget for.
At 19.95% p.a. over five years, a $30,000 car loan works out to $803.01 a month, or $186.93 a week, including interest and fees. Your repayments depend on your interest rate (from 9.95% to 29.95% p.a.) and the term you choose.
Paying cash is cheapest if you can do it and still keep a safety net. If paying cash would empty your savings, or you need a car before you can save enough, finance can make sense, as long as the repayments are affordable.
You may be able to. A benefit counts as income, as long as it's regular and the repayments fit comfortably in your budget.
