Rental cars versus car loans: A guide for non-residents and visa holders

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Are you visiting Australia as a non-resident or a visa holder?

If the answer is yes, the chances are you're looking for a reliable mode of personal transport to keep you mobile during your stay.

With the country's extensive road network, owning a car in Australia naturally provides an array of benefits.

Not only will you be able to take control over your own transportation needs, but you'll also be able to go exploring during your downtime, embarking on weekend road trips and getaways that'll allow you to experience more of Australia.

As car ownership is also considered to be more of a necessity rather than a luxury here in Australia, you may even find that the costs of car ownership are actually far more preferable in Australia compared to what you may be accustomed to in international auto markets.

But even with more reasonable vehicle valuations and fuel costs, car ownership is still a sizable ongoing expense.

If you're moving to Australia on a limited budget but still expect that you'll need to factor in the costs of car ownership, then you'll be happy to hear that there are options available to you alongside simply purchasing a car outright.

The two main options you may find yourself considering are either leasing or renting a car or taking out a car loan.

There are plenty of affordable, long-term rental car options and even flexible car loans for you to select from, so finding the right solution for you will naturally include weighing up the unique pros and cons for each arrangement.

We'll be providing some guidance today by outlining some of the key differences, benefits and drawbacks of these two options.

Continue reading to learn more.

If you want to rent a car, you can typically do this via a car rental agency. Rental car companies range from large multinationals to smaller local operators.

For a daily fee, you can hire a recent model car to get you from A to B.

The benefits of hiring a car are that you're not locked into any long-term financial commitment, and you can return the car when you're ready.

Taking out shorter term rental vehicle agreements will also free you up to drive different kinds of cars.

This opportunity to trial different vehicles is ideal for any visa holders who are looking to buy their own car in time but want to get a feel for different vehicles without having to deal with all the responsibilities of car ownership.

As you can see, there are some key benefits to this method of transport, but also some limitations.

For starters, the cost of a car rental long term may become quite expensive, unless you go for the most budget option. Of course, going for a more budget rental car arrangement may mean sacrificing modern driving features.

Car rentals can range from $50-150 a day or more, depending on the type of car that you hire. You'll also need to ensure that you return the hire car with a full tank of fuel.

Otherwise, they will charge you a steep refuelling fee.

Also, you will have a very steep excess payment so be wary of associated costs in the event that you are at fault during a road incident.

In most cases, you can obtain a car loan by approaching a bank, lender or other financial institution. You can then drive off with a car that's registered in your name.

This means that you own the car - just not outright.

So, although you're responsible for making repayments on your loan, the car is still considered to be your personal asset rather than the asset of a rental provider.

Car loans can also span over years, making them an ideal car finance solution for those on longer term visas.

If you're expecting to reside in Australia for a period of two or more years, purchasing a car with a car loan may end up being more affordable in the long term than taking out a long term rental vehicle.

And what if you're only expecting to stay for a period of 1-2 years?

Then there are still plenty of flexible loan options available for you to select from that may still be more cost-effective than renting a vehicle.

In most cases, you're going to need a deposit or down payment for the vehicle. This is typically between 10 and 20 per cent of the purchase price.

The lender will pay the dealership for the rest or deposit the money in a bank account if you are purchasing privately.

You will also incur interest fees, which is how car loan lenders make their money when they loan it out to you.

This will range from 6 to 15 per cent, depending on a few factors such as your deposit amount, your credit history and the type of loan that you choose.

It's worth mentioning that with a car loan, unless you choose a novated lease, which this article doesn't discuss, you will still need to pay for insurance, fuel, servicing and maintenance, tyres and tolls.

This can all add up quickly, so don't just factor in the loan repayments when working out how much it will cost to keep you on the road.

With a loan, you're obliged to make repayments even if you lose a job, and you can face credit report impacts and even bankruptcy if you default on a car loan.

By weighing up all the pros and cons we've outlined above, you should be able to determine whether securing a rental car or taking out a car loan is the right solution for your personal transport needs while you'll be staying in Australia.

Just remember to crunch the numbers on any lease arrangements or loan contracts that come your way to ensure that you're getting the best possible deal.