Should I Finance a Car or Pay Cash?
Choosing to finance a car or pay cash is one of the most important decisions a driver can make when buying a vehicle. So, it’s important to understand which option will work best for you and your budget.
In this helpful guide created by the team at Val-U-Line®, we’ll take a closer look at both options, so you can get a better idea of whether you should finance a car or pay cash.
Why Should I Finance a Car?
Financing a reliable car comes with loads of benefits. Overall, it’s an ideal option for any driver that’s been thinking about buying a reliable vehicle but may not want to buy it in full. That’s because financing allows you to pay for the car in monthly payments over the course of two to seven years. You can also put a bit of money down to reduce the cost of monthly payments.
Also, auto financing is an excellent way for car-buying college students and those with low credit scores to build and improve their credit. Being approved for a loan and making payments in full and on time each month will help establish and enhance your credit history over time. That way, you’re more likely to be approved for even better rates and terms in the future.
Worried about how your low credit score can affect your approvals and terms? Many nationwide car dealerships offer low or no credit financing, so you can get the financing you need to drive home in the car you want.
While there are tons of great perks of financing, there is a drawback that all drivers should consider: interest rates. The interest rate is a percentage of the loan amount borrowed that’s added to your monthly payments. Overall, it can raise the total amount you end up paying when financing.
Why Should I Pay Cash for a Car?
Paying for a car in cash is one of the best ways to help a driver save a bit of money on their purchase. Again, the interest rate can make your monthly finance payments higher. For example, if you take out an auto loan for a used car that’s $15,000 and your interest rate is around 5% over the next the next five year, you could end up spending close to $2,000 extra on your vehicle.
Fortunately, you won’t need to deal with interest when you decide to pay with cash. That’s because you won’t need to take out any loans. So, if you wanted to buy an affordable used car in full, all you’ll need to consider is the price, as well as taxes and additional fees. Plus, you won’t need to deal with any monthly payments.
However, like financing, paying cash for your vehicle has some drawbacks. One of the most important ones to keep in mind is that buying in cash can deplete a bit of your savings depending on the price of the car. With that said, you want to make sure you’ve budgeted properly before heading to the dealership.
Financing a Car vs Paying in Cash: The Bottom Line
When it comes to financing a car vs. paying in cash, deciding which is right for you will come down to your specific preferences. If you’re a first-time buyer that’s looking to build their credit or want to spread your payments out over a few years, consider financing. If you have the money to pay for your vehicle in full and want to forgo any interest rates, buying in cash is for you.
To learn more about the pros and cons of financing and paying in cash, as well as other available used car-buying options, contact Val-U-Line®!