Expert Advice: Should You Buy a Car on Finance or Cash | CMI Toyota

Expert Advice: Should You Buy a Car on Finance or Cash

Posted: 23/08/2021
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For some prospective car buyers, the decision to buy a car with cash or finance can be confusing. Understandably, some buyers are unable to buy their dream car with one cash payment and will need to discuss their finance options before buying the car. 

The average price of a car in Australia is approximately $40,000. Even if someone is in the position to purchase their dream car outright with cash, there are many benefits and reasons to consider the range of car financing options available at CMI Toyota. We’ve put together further information and benefits around financing a new, demo or used vehicle with CMI Toyota. 

Buying a Car on Finance vs. Cash

When comparing buying a new or used car with cash or on finance, many people may find that buying a vehicle on finance is a very sensible option. This is largely thanks to the range of finance and insurance options CMI Toyota offer for new, demo and used cars so that our guests can buy the car they prefer. The finance and insurance options available from CMI Toyota are designed to ensure a car buying experience is simple and convenient and avoid the need to not only negotiate the price of a vehicle, but then pay thousands of dollars up front in one transaction. 

The CMI Toyota team understand that many people may be thinking – If I have funds readily available and can pay for the car outright, why would I even consider buying the car on finance and paying the financing costs and interest for years to come? If cash is available, how can this be a decision that requires more thought? Well, this article will provide further information about why buying a car on finance is the better option – there are a lot more benefits than what many people may realise. The CMI Toyota Finance and Insurance team have collated our top 5 reasons as to why car buyers should consider buying a new, demo or used car through the finance options available at CMI Toyota. 

Researching Finance Options

1. Opportunity Cost

Let’s assume a car is bought with $40,000 in cash. Congratulations! That person is the proud owner of a great vehicle that will be theirs for as long as they desire. While the happiness sinks in, they do have to consider the opportunity cost they have just incurred. By using the full $40,000 they had available, this person can now no longer use that money to make any other investments. Plus, they have foregone the interest they could have received by having that money in their bank account for a long period of time. 

In some instances, there may also be tax advantages if the vehicle is purchased on finance and is used for business purposes. This is thanks to some people being able to claim tax advantages as a result of the interest component on their loan facility.

2. Covering the Cost of Ownership

A fundamental problem in buying a car entirely with cash is that it does not take into account the total cost of ownership of the vehicle. Let's assume a potential car buyer is a retiree who is choosing to downsize and may be reliant on the pension for their income. If they decide to use the available money, thanks to downsizing, to buy a car with cash outright, they no longer have that cash aside for ongoing ownership expenses.

When buying a vehicle, you need to consider the other ownership expenses, such as fuel, license costs, insurance costs, vehicle repairs, tyre replacements and roadside assistance. All of these things add up and research has shown that five years in a major city like Adelaide can cost you over $16,000. This is nearly 50% of the purchase price of the car, which was not accounted for when decide to pay by cash.

If a car buyer was to buy their vehicle on finance, they will be paying off the loan over the set loan period and will not be required to pay the full amount up front. This gives them the opportunity to consider the total cost of ownership over the period that they own the vehicle, budget accordingly and be prepared for some of life’s extra surprises!

Car handover

3. Room for Upgrades 

Unlike buying a house, cars generally depreciate in value. If homeowners are looking to upgrade their house, once its value increases they can sell it and buy their next, likely upgraded, house or use the excess cash some other way. In comparison, most cars, other than classic cars (which are an altogether different asset class), incur a depreciation. This is one of the reasons why car buyers cannot depend on their current car's resale to support a required upgrade for their next car. 

Let’s assume a vehicle was bought outright with the $40,000 cash the buyer had available. In three years, the car may incur a depreciation of over 50%. When the car owner decides it’s time to sell the car as they need to upgrade, they to manage find a suitable buyer who is valuing the car at 60% of its original selling price. Whilst this offer may be better than the 50% depreciation, it is still a loss of over $16,000 from the original price the current owner paid. If this person was dependent on the money from the car’s sale to buy their next car, their budget has significantly reduced.

With finance options such as Toyota Access, car buyers have peace of mind knowing what the Guaranteed Future Value* of their car will be. Toyota Access provides personal and business customers with a whole new way of buying a Toyota, allowing car buyers to choose their preferred vehicle, pick a deposit (if any), select the loan term and the total KMs they expect to travel. The CMI Toyota team will then calculate the Guaranteed Future Value (GFV)* of the vehicle and the monthly repayments will be calculated – it’s that easy! A vehicle’s GFV is based on the length of the loan term and the number of kilometres driven by the buyer so that they know what it’s price will be if they do decide to sell it in the future.

4. Going Beyond The Perceived Budget 

As a kid, when you had $10 in your pocket, what was your budget for buying yourself lollies or chocolate? There is a high chance the budget was under $10 as you didn’t have access to credit or finance. Car buyers do not have to limit the car options available to them based on the cash budget they have. There are a range of finance options available at CMI Toyota to help buyers buy their dream car. 

Taking this into consideration, car buyers may find that their cash amount of $40,000 is only enough to buy a mid-range car which may not suit their current circumstances or lifestyle. However, if they decide to purchase the vehicle on finance and use a portion of their available cash for the deposit, they can significantly increase their options which enables them to consider a more premium vehicle that is a better fit for their lifestyle and needs.

The CMI Toyota finance team are on hand at each of our dealerships to help car buyers calculate their Personalised Finance Rate. Our team have years of experience in assisting guests to ensure a personalised loan is offered, taking into consideration specific budgets, whilst offering flexible rate loans, flexible terms and competitive interest rates. Best of all, it’s organised at the time of purchasing a new, demo or used vehicle making it hassle free! 

5. Build A Credit History

It’s also important to consider the benefits of financing a vehicle through our range of finance options to help build a credit score. If a car buyer is young and buying their first car in their name, they should consider a car loan, even if they can afford the full cash payment. This is thanks to the car loan translating into an expansion of their credit history.

Over the period of the car loan, independent credit rating agencies would then observe their timely payments and increase their credit score. This increased score may later help them get other personal and business loans, possibly at a lower interest rate, in the near future. 

By now, we hope that we have given car buyers a lot to consider and there is a greater understanding of the many benefits of financing a vehicle with CMI Toyota and Toyota Finance. Overall, it is a more financially prudent decision in the long run. 

Toyota RAV4 car delivery

The CMI Toyota team are committed to ensuring the finance option our customers choose is personalised to their individual circumstances and want to assist them in purchasing their dream car!

If you’d like to find more about our secured and unsecured finance options, including Toyota Access, Toyota Personalised Repayments, and would like to know which one would suit your needs the most, get in touch with the CMI Toyota team today.


The information on this website is of a general nature and for information only. Nothing on this website constitutes or should be considered to constitute legal, taxation or financial advice. Before making a decision about any of the products and services featured on this website, you should consult with your own independent legal, taxation and financial advisors, who can advise you about your personal circumstances.
Available for approved applicants only. Terms and conditions apply. Toyota Finance is a division of Toyota Finance Australia Limited ABN 48 002 435 181, AFSL and Australian Credit Licence 392536. 
*The Guaranteed Future Value (GFV) is the minimum value of your Toyota at the end of your finance contract, as determined by Toyota Finance. If you decide to return your car to Toyota at the end of your term, Toyota Finance will pay you the GFV amount, which will be put against your final payment subject to fair wear and tear conditions and agreed kilometres being met. The information provided is general in nature. You should seek your own financial advice to determine whether Toyota Access is appropriate for your individual circumstances. Terms, conditions, fees and charges apply. Toyota Access Guaranteed Future Value products are available to approved customers of Toyota Finance a division of Toyota Finance Australia Limited ABN 48 002 435 181, AFSL and Australian Credit Licence 392536

Just some of CMI Toyota's advantages:

  • Toyota Access
  • Toyota Genuine Parts
  • Toyota Certified Advantage
  • Toyota Insurance Advantage
  • Toyota Fleet Specialist