What is better: car finance or cash?
Thinking about purchasing a car but wondering whether to car finance or cash? Don’t worry, in this post, we go into the top 3 reasons for either!
This post is about car finance or cash.
Let’s dive into the top 3 pros for car finance or cash.
Car Finance:
1. Spreads Cost Over Time
Spreading the cost over time into monthly payments makes large purchases easier to swallow and more palatable. This is important especially if you are able to set aside a fraction of the full cost every single month, but may not have the entire lump sum in cash to fork over. Therefore, financing could be a good option for you.
2. Build Credit
If payments are made on time, this could help build credit. How? Well, there are a number of factors as to how financing can help with building credit. Some of the factors include: improving the credit mix (different types of credit), establishing payment history, increasing the length of credit history, and more.
3. Keep Cash for Other Investments
One of the most important reasons is being able to keep cash for other investments, emergencies, or purchases! Keeping extra cash liquid is very valuable and offers options. Again, while you may have the entire lump sum in cash to fork over, monthly payments may make more sense as it’ll help you keep more of the cash. The cash you can put into other investments, save, or use for other more urgent purposes.
Cash:
1. No Monthly Payments (Lower Cost Overall)
You don’t need to worry about the headache of additional monthly payments! Instead of setting aside a certain amount every single month, that budget can be used on other things that can actually make you MORE money like savings and investments. This, alone, could mean lower cost to you overall. On top of that, you have more bargaining power with the dealer.
2. Easier Resale
Decided you’re ready to move on and purchase a different car? If you paid in cash, this makes the resale process much easier. How so? Well, there’s one less party you’d have to consider and get alignment with. When you finance a car, you are not technically the legal owner; the lender holds the title until the loan is entirely paid off. So when you pay for a car in cash, the only parties that need to agree are the buyer and seller.
3. More Freedom for Insurance
When financing a car, some lenders may require specific coverage, because they are technically the legal owner of the vehicle. That being said, they want to protect their investment. Some lenders may require full coverage, whereas, you only want certain types of coverage and not everything full coverage entails. When you own the vehicle outright, you can have the freedom to choose.
To reiterate, the top 3 reasons for car finance or cash are:
Car Finance:
- Spreads Cost Over Time
- Build Credit
- Keep Cash for Other Investments
Cash:
- No Monthly Payments (Lower Cost Overall)
- Easier Resale
- More Freedom for Insurance
