A lot of people have been confronted with this dicey period when they need to make a life changing choice between going for car loan or splurging the whole cash when purchasing their car. Lack of money isn’t necessarily the singular motive behind financing or taking car loan as a means of getting that car to their garage. Many do prefer to re-invest the money into more lucrative ventures while servicing the car loan along the way.
It’s human sometimes to make mistakes. Things might sometimes get bumpy along the way especially at the point of payment. Regardless of the payment plan for car loan, things sometimes do not work as we planned. This shouldn’t discourage you from taking up a loan to get your dream car. We are definitely against going way beyond your financial capability by taking a ridiculous car loan. For instance, if your finances can easily service a car loan of 2015 Toyota model or similar brands, you do not take a car loan of Rolls-Royce or Bugatti, which might wreck you and incur massive debt on your neck.
We understand that some people do not like anything to interfere with their goodnight sleep especially when it comes to taking loan. We do not disagree with your policy as well as your keen interest in your wellbeing, but we assure you that some car loan wouldn’t give you headache or put you into big financial trouble. It all depends on taking the smart route in car financing.
One of the biggest concerns potential buyers usually have is: How will they pay for the car? Should they finance it by loan or payment in cash?
Not to worry, we will address all your concerns, starting from the advantages and disadvantages of taking car loan in the 21st century as well buying the car at once.
Car financing: the advantages/disadvantages of cash payment versus car loan
One thing you enjoy when buying your car with cash is that you do no need to pay an interest on the standard price. For most cars, their value drops with time. They become cheaper as newer models are rolled off the production line. So, buying a car might not be an investment venture after all except you are spending money on auto collectibles. To put it this way, it seems a bit strange paying interest on something that loses value overtime. It means you are actually incurring losses in 2 ways.
One of the biggest advantages of one-time payment is that it gives you full ownership of the car. You can decide to use it for anytime you like. Taking loan on the other hand gives the lending institution or person a certain control over the ownership of the car. When you default in the payment of this car loan due to financial problems, the car might be taken from you till you pay the pending debt. Payment in cash gives you the right to sell your car for any reason known to you without having to consult or take permission from any lender. When the car is financed by loan, part of the amount you sell the car for will be used to settle the loan and interest weighing on your neck.
Life they say isn’t always sweet on the other side. Paying at once could come with a lot of problems too. Not everyone can afford to pay for a car at once without running into financial mess. It is also important to think it through before dropping all your life savings on a car. While one-time payment takes off the hassle of threats and sometimes sleepless nights, it isn’t financial smart to spend more than what you can afford at that time. Car loan comes pretty handy in a situation like this when you need to acquire a car you really like but do not the whole cash on you at that point in time. Financing the car will it make stress-free for you to get a more quality auto product that would be relevant in the nearest future.
When you spend all your money on a car at once, you might end up depriving yourself of other good things of life. The money is therefore not available to take care of other needs. You also need to know that buying a car isn’t only thing that makes you a car owner. You need to engage in many replacement and maintenance routine that could cost a lot of money. Even though we iterated earlier that you will pay interest on most loans, but the bulk of the money will be with and is available for other valuable use.
Whether you are obtaining car loan or buying with quick cash, they are both good decisions depending on your financial state and scale of preference. If the type of car you intend to get is slightly above what you can do afford at that point in time, we would encourage you to go for financing. If you can compromise your taste and go for cheaper car that won’t hurt your finance, you can decide to pay at once. Whatever rocks your financial boat! Refrain from raiding fund designated for unforeseen circumstances, unless buying a car falls within that list. Splurging all your cash on a car might take your real objective further out of reach. Spend wisely and do not take loan that will give you nightmare every time you lay on the bed.