Buying a new car can be a stressful experience, especially if you’re considering getting a car loan. Mots people will opt for financing their new vehicle vs. buying it outright. Some people opt for paying their car over time, and using the money to pay for other expenses through freeing up capital. It’s important to consider all the facts when deciding whether to pay cash, or finance a car.
When Paying Cash Makes Sense
Knowing when to borrow money can seem tough, but it’s really simple to calculate. If you have been saving money for a new car, then you might have come to the point where you are ready to pay for it. Here are some benefits of paying cash for a car.
- Paying cash for a car means you will not have paid any interest for the car. Paying interest is just extra money that is added to the sale price of the car the longer you have to pay payments.
- The car is yours and there is no third-party interest. Paying cash means the car is yours. All the equity that you have in the car is yours and you can use it for your advantage it there is a need to do so.
- There are no monthly payments if you have paid cash for the car. You do not have to worry about missed payments or late fees.
- As it’s said, the minute you drive the car off the lot, it nose-dives in value, so you could be financing a car that’s worth less than the financing cost.
When Borrowing Money Makes Sense
Not every person has the option of paying for a car with cash. Sometimes a person may live paycheck to paycheck and not have a lot of money to spend on a car. Usually there is a need that requires the person to borrow money in order to have the car to use for work or business purposes. Here are some benefits of borrowing money for a car.
- Borrow money to buy a car gives you the opportunity to build up your credit score. To build a good credit score you first must have a loan. A car loan is something that is easy to get and if you borrow from the right lender you will have an excellent interest rate.
- A car loan speeds up the time you need to wait to get a new car. Saving money takes time and a lot can change while you are saving for the car. A car loan puts you in the car and allows you to use the car immediately.
- You can get preapproved for a car loan which can help you negotiate a good price for the vehicle. In some cases getting the car loan through your dealer would allow you more negotiating power when buying a car.
There are certain times when borrowing just makes sense. If you are looking to borrow money to buy a car and are wondering what your payments might be, then use a calculator to help you determine your payments.