You are in the market looking for a vehicle. You have been doing your due diligence on the different types of cars. It helps that your car dealership of choice has been accommodating. And now you know what type of vehicle to buy. But, you are grappling with another critical decision. Should you buy cash or through vehicle financing.
Our article will show you why vehicle financing may be the better choice.
Vehicle Financing; Why You Should Consider It
Many people would argue that buying anything cash frees you from debt. But, it is only possible if you have the financial might. Vehicle financing is an option for those who don’t have money for upfront payments.
Buying a car by cash has certain disadvantages; the major one being depreciation. Within the first three years, your car will lose up to 50 to 60% of its value.
Several factors will determine how fast the depreciation happens. Such include quality, running cost, and price. It can have a huge impact, especially if you are buying a new vehicle.
When looking for auto financing, have the following considerations in mind.
- Shop around for the best rates. High-interest rates drive up the final cost of the vehicle
- Take into consideration every charge that comes with the loan. It will provide you a basis for comparing the options available
- When negotiating the terms, make sure you can afford the monthly payments. You could affect your credit score if you delay
- Understand the terms and agreements before signing the dotted line. Some financial institutions may impose a penalty for early repayments. They may also have other charges that could make the loan more expensive for you.
The Advantages of Car Financing
1. You Have Tons of Options
If you go for cash payment, your options go as far as how much you have at that particular time. Such limitations do not exist when you go for vehicle financing.
All you need to determine is your ability to make the monthly payments. You can then negotiate with the financier on the repayment period. You also have options with the type of financing and where you can get it from. You can enter a financing deal with the bank or car dealership.
When you borrow from the bank, you have the advantage of knowing the terms well in advance. Discuss the credit terms to know whether you’re getting the best rates.
Dealership financing means you get the facility through the car dealership. Like in the case of the bank loan, you will agree to the terms of payment. You will also need to pay a finance charge. Dealership financing provides a lot of conveniences because it provides a one-stop solution. You can also enjoy some of the offers they throw in to attract buyers.
You also have options with the type of financing. Such include higher purchases, credit card loans, personal loans, and personal contract purchases. Speak to a financial advisor to have a good understanding of what each entails. You can then make an informed decision on the best option for you.
2. A Chance to Invest Your Spare Cash
When you go for vehicle financing, you only need to have enough cash for a deposit. Any balance can go towards some type of investment. It allows you to earn income in several ways.
Such include capital growth, dividends, or even interest. When you look at it long-term, it makes for sound reasoning. You end up owning the vehicle while having an income source.
If you are buying the car for business, it qualifies for a tax-deductible. You can also claim the other costs of owning the vehicle. Such include insurance, service, repairs, and even interest. The money you save can go into running the business.
3. It Can Impact Your Credit Score
Vehicle financing can positively impact your credit score. It improves your eligibility for future loans. You must, however, play your part by making the monthly payments on time. Good payment history shows that you are a low-risk borrower.
You improve the chances of getting better interest rates if you need the financing facilities again. Before applying for the financing, make sure you check your credit score. Even with a poor credit score, it is possible to get car financing.
You must, however, note that the interest rates will be higher. Give yourself enough time to shop around for the best rates. Different financiers have different rates and value ads. You could save yourself a lot of money by taking the time to do this.
4. You Can Spread Out the Monthly Payments
Vehicle financing allows you to make payments over an extended period of time. You will need to talk to the financing company to work around a schedule that works for you.
It is important to understand that a longer payment period could be more costly. Remember, the monthly payments attract interest. It could drive up the cost of the car.
Some lenders will also charge a higher interest rate if the repayment period is longer. If you you have the option, go for shorter loan terms. Yes, you will be making higher monthly payments. But, you can offset the loan sooner without paying too much interest.
5. You May Not Even Need Down Payment
Some institutions can offer 100% car financing. What this means is you do not have to struggle to look for a deposit. All you need to do is identify the car, and the financier makes the full payment. Without spending a cent, you can drive out of the dealership with a new car.
Vehicle finance is a fantastic choice when purchasing a vehicle. Instead of using all your money on cash payments, you can spread it out over a period. It allows you to use your money for other income-generating activities.
You also have options with the type of financing. You can take a personal loan, car loan, or credit card.
Other options include hire purchase and finance lease, to name a few. It is important to shop around and compare the rates.
Consider talking to a financial expert for some advice. You could avoid some costly mistakes.