So, you’re thinking about buying a car?
Maybe your current vehicle is starting to show its age. Maybe you’ve just landed a new job and need something dependable. Or maybe it’s time for a car that fits your lifestyle better, something safer, more fuel-efficient, or practical for life here in WA.
Whatever your reason, buying a car is a big financial decision. And for many of us, it’s not just about choosing the right vehicle, it’s about understanding how to afford it. From budgeting and ownership costs to the ins and outs of finance, this guide covers everything you need to know to make a confident move.
Can you afford a car in 2025?
Let’s start with the basics. A brand-new car in Australia today typically costs between $35,000 and $50,000. Used vehicles in good condition often fall between $18,000 and $30,000. Then there’s the in-between option, demo cars, which are priced just under new but with many of the same benefits.
Beyond the purchase price, car ownership comes with a set of ongoing expenses that are important to factor in. Registration and car insurance together can cost between $1,000 and $1,500 a year, depending on the vehicle and your driving history. Routine servicing may be capped, but it still adds up; most services fall between $300 and $600, and major services can be more.
Fuel is another key consideration, especially if you’re commuting across Perth or taking longer drives regionally. With petrol sitting around $2 per litre, a typical month could see you spending $150 to $300 on fuel alone. You’ll also want to allow for tyres, unexpected repairs, and other day-to-day costs like parking, tolls, or roadside assistance.
If you’re wondering whether you can realistically afford a car, it’s worth taking a closer look at the full picture, including upfront costs, running expenses, and what kind of monthly repayment structure fits your budget.
New, used or demo? What’s the difference?
Most buyers look at either new or used when car shopping, but there’s another option that sits comfortably in the middle: demo cars.
A demo is a dealership-driven car that’s never been privately owned. These vehicles have usually done a few thousand kilometres for test drives or display purposes, but they’re still in near-new condition and often come with a full manufacturer’s warranty. Because they’re not technically “brand new,” demo cars are usually priced a few thousand dollars lower than their showroom counterparts.
They can also come fitted with extras, think premium interiors or upgraded wheels, added by the dealer to boost appeal. Crucially, you’re not buying from a private seller when you buy a demo car. You’re dealing with a professional team, full logbooks, and a trusted process. Car dealers also often include bonuses such as registration or service packages, which can further increase value.
It’s a smart way to get more value without compromising on quality. If you’re not familiar with how demo cars work, they’re dealership-driven vehicles that haven’t been privately owned, often used for test drives or display. Buying one is a little different from purchasing new or used, but with the right approach, it’s straightforward and offers excellent value.
What is a car loan?
A car loan allows you to buy a vehicle now and repay it over time. Rather than needing the full purchase price upfront, a lender covers the cost of the car and you repay them in instalments, usually over three to seven years, with interest. Your loan amount will typically depend on the vehicle price, your deposit (if any), and your ability to service the repayments.
To apply, you’ll typically need to provide identification, proof of income, and your credit history. Some loans also require a deposit, though not always. Approval also depends on the lender’s eligibility criteria, which can include your credit score, employment history, and overall financial situation.
Repayments are usually made weekly, fortnightly or monthly, and your interest rate will depend on factors like your credit score, the type of loan, and whether the vehicle is new, used, or demo.
Types of car loans explained
There’s no one-size-fits-all car loan. The best option for you will depend on your income, employment type, credit history, and the car you’re buying. Here’s a clear breakdown of the most common types in Australia and how they work.
Secured vs unsecured car loans
Secured car loan
This is the most common type of car finance. With a secured loan, the car itself acts as collateral. If you fail to make repayments, the lender can reclaim the vehicle. The upside? Secured loans typically offer lower interest rates, making them a popular choice for buyers purchasing new or demo vehicles.
Secured loans are ideal if you have stable income and want predictable, affordable repayments. Many secured loans also offer the flexibility to make extra repayments, helping you pay off your loan sooner and reduce interest over time.
Unsecured car loan
In contrast, an unsecured loan doesn’t tie the vehicle to the loan as security. That gives you more flexibility, particularly if you’re buying a used vehicle privately, but it also comes with higher interest rates due to the increased risk for the lender.
This option suits buyers who want to avoid restrictions on how they manage or sell their car during the loan term.
Employer-based and business-use loans
Novated lease
A novated lease is a three-way agreement between you, your employer, and a finance provider. Your car repayments are taken directly from your pre-tax salary, which can reduce your taxable income and streamline ownership costs like maintenance and fuel.
This setup works well for full-time employees whose workplace offers salary packaging. Just be aware that if you change jobs, you may need to renegotiate or refinance the lease. All terms and conditions will be outlined in your agreement and should be reviewed carefully.
Chattel mortgage (for business use)
This is a commercial car loan used when the vehicle is primarily for business. You own the car from day one, and repayments are structured similarly to a personal loan. Eligible buyers, typically ABN holders, can claim GST, depreciation, and interest as tax deductions, making it an efficient choice for tradies, freelancers or small business owners.
Dealership finance and promotional offers
Dealer finance
Some dealerships offer in-house finance or partner with third-party lenders to provide loans at the point of sale. This can be convenient, you can apply and be approved while you’re choosing your car, and it may come with promotional rates or packaged benefits like extended warranties or free servicing.
While dealer finance can be competitive, it’s always worth comparing with external lenders and checking the full comparison rate, which includes fees and charges, not just the advertised rate. In many cases, variable rate options are available, offering more flexibility but potentially changing over time based on market conditions.
Loans with flexible or eco-friendly structures
Balloon payment loans
This structure involves lower regular repayments during the loan term, followed by a larger lump sum, called a “balloon payment”, at the end. It’s a good option if you’re planning to upgrade, trade in, or refinance after a few years, but it does require discipline and planning to cover that final amount.
If you go this route, make sure you have a clear plan for the balloon when it comes due.
Green car loans
Some lenders offer special financing for environmentally friendly vehicles, typically hybrids or electric cars. If you’re considering a fuel-efficient or low-emission vehicle, you might be eligible for a lower interest rate, which can reduce your total cost over the life of the loan.
Always check with the lender for eligibility and vehicle criteria before applying, and confirm all terms and conditions to ensure the loan meets your expectations.
Why finance instead of saving?
A well-structured loan can keep your repayments affordable, spread out the cost, and even help improve your credit score, provided you make repayments on time. It also lets you keep funds aside for emergencies or other financial goals, rather than tying it all up in a depreciating asset.
As with anything financial, the key is to understand the full cost, read the fine print, and make sure the repayments fit comfortably into your budget.
So, what’s next?
By now, you’ve got a solid understanding of car finance in Australia, how it works, what it costs, and the different types of loans available. You’ve also seen that demo vehicles can offer smart savings without sacrificing quality or peace of mind.
Whether you’re just starting to explore your options or already narrowing down your shortlist, being informed is the best way to stay in control.
When you’re ready, we’re here to help
At Perth City Subaru, we understand that value, trust and flexibility matter, especially if you’re buying your first car, upgrading for a growing family, or working within a tight budget.
That’s why we offer clear, competitive Subaru car finance options and a strong selection of Perth City Subaru demo cars that give you more for your money.
There’s no pressure. Just practical advice from a local team who genuinely wants to help you find the right fit for your lifestyle, your finances, and your next chapter on WA roads.