Financing vs. Paying Cash for a Car

sarahheller By sarahheller, 5th Mar 2015 | Follow this author | RSS Feed | Short URL
Posted in Wikinut>Money>Loans

Buying a new car is exciting, but it is important to figure out if you want to take out an auto loan or pay cash for your new vehicle purchase. There are advantages and disadvantages to each method of buying a car, and it is important to understand your options.

Your Options

Paying cash for a car requires a buyer to have a lot of cash saved up, but it also allows him or her to avoid paying interest and fees on an auto loan. Furthermore, many people find that paying cash makes it much easier to budget for transportation expenses. Because a person can choose how much to set aside each month to save towards buying a car, many people have found that paying cash gives them a lot more financial freedom. During the purchasing process, a cash buyer knows exactly how much he or she could spend on a new vehicle. After buying their new car or truck, the buyer owns the car outright; no matter how bad times get, no banks can take the vehicle away.
Of course, saving up enough money to buy a car or truck with cash can take years. Many people who already have an auto loan can find it difficult to save while making their payments. Because of this, many people who pay cash for their cars wait at least five years before replacing their vehicles. People who use their vehicles frequently and replace them more often than this might find buying with cash a hard method.
Using an auto loan allows a person to make monthly payments without having to save for a long period of time, but a buyer has to pay interest on the loan and make his or her payments every month or risk losing his or her vehicle to the bank. Applying for an auto loan usually only takes a few minutes, but it is important to pay attention to the costs of the loan. While a buyer has the loan, he or she must make the payments no matter what. If a person loses their job or otherwise cannot pay, he or she loses their car.


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