Your guide: should I finance a car or pay cash?
So, you have your eyes set on getting a new car.
Good for you. This is such an exciting time. We’ve all been there when you’re in the dealership and you’re trying to figure out the best way to actually make the purchase.
Although if you’re already in the store, you probably have your mind made up.
However, if you’re doing your initial research, you might wonder, “Should I finance a car or pay cash?”
Today, we’re going to cover just that.
Keep reading to find out.
Also read: BRICS: China Dumps $74 Billion Worth US Treasuries in 7 Months
Car financing basics
First, let’s understand the basics of car financing. You really have two options. One option is to pay upfront for everything. This will keep your total spending lower over time.
However, with a car loan, you’re going to be able to spread the cost of the vehicle over time.
So, the good thing with this is that you’re not going to be out of a huge lump sum of money.
But, the question still exists. Which is better?
Also read: BRICS: China Dumps $74 Billion Worth US Treasuries in 7 Months
Is it better to pay cash or finance a car?
If you have the cash stashed aside to purchase a vehicle, it’s probably going to be best to pay in cash.
This way, you can save the most money.
However, if you don’t have the money to purchase a car outright, a car loan is probably going to be the best option.
Also read: BRICS: China Dumps $74 Billion Worth US Treasuries in 7 Months
Advantages of paying cash
There really is no disadvantage when it comes to paying cash for a car.
It’s mainly going to boil down to whether or not you want to fork over a big lump sum of cash.
One thing you might run into is that the dealership will most likely want you to finance the car and offer better incentives if you do go through their loan programs.
You need to think about it. Their business is to make more money. So, if you spend more over time with their interest rates accumulating, they might throw over a few additional incentives. This is just another thing to think about.
Should I finance a car or pay cash?
If you really wanted to work the system, we’d probably recommend doing both.
Why?
Well for starters the dealership is going to want to make the most money off of you as a customer, right?
So, let them think that that’s what they’re going to do because they are going to throw incentives at you in order for you to choose their loan options.
What you could do is use their loan option for several months. This is assuming that you had the initial lump sum of cash ready to go.
This way, you can have the best of both worlds. You can gather all the incentives that the dealerships want to give you without getting buried in interest rates.
Make sense?
Conclusion
In conclusion, when you’re buying a car and you’re trying to figure out how to make the purchase, it’s going to boil down to your current financial situation. Paying upfront in cash is going to save you the most money because you won’t accumulate interest rates or loan fees.
If you can afford the lump sum, you’re going to save the most money. However, if that’s not on your cards, a loan option will make the most sense and is what most people do.
Whatever your decision, just remember to do a little research and ask around. See what others have done, and you might find an option that’s best for you.
Happy driving!