Owning a car has become a necessity nowadays. It is getting harder to use public transportation due to the volume of people using it. On top of that, cars come in handy during emergencies. It is understandable that you would want to buy one for yourself and your family. However, buying a car is quite expensive. Unless you have a few thousand dollars lying around, you would most likely want to apply for a car finance product.
A car loan can have a positive effect on your life, if you manage it properly. Conversely, if you mishandle your repayments, then it can turn out to be a costly mistake. This mistake can cause you to experience financial and emotional stress.
So it is a good idea to do your research before getting a car loan.
What are Your Options?
Everyone has different circumstances; therefore, getting a loan may be ideal for one person but troublesome for another one. You should consider all your options. Think of the car that you want to buy, then evaluate if you can handle the price.
There are many different options available for you, and like most things, they have their advantages and disadvantages. You can either pay using cash upfront or make use of car finance products.
About Cash Car Sales
Advantages of Cash Car Sales
1. Cash car sales are relatively uncomplicated.
All you need to do is to find a car that you like, give the dealer the money and you’re done! You now have a car—It is a simple as that.
Of course, buying a car comes with other responsibilities, like making sure that it is properly registered, insured, etc. This way allows you to spend less time and effort on application forms and credit checks.
2. Cash car sales are much more flexible than applying for car finance.
If you buy your car with cash, the vehicle will become yours in an instant. You can use it right away. In the case that you want to buy a new car in a year or two, you are free to sell or trade-in your current vehicle. You do not have to worry about break fees or loan repayments.
3. Car cash sales can be cheaper.
Sure, a car can be costly when you are buying it in cash. However, it can be less expensive overall than paying back a car loan over an extended length of time.
Buying your car with a lump sum of cash allows you to avoid paying for fees and interest charges. This method can save you more money in the long run.
Disadvantages of Cash Car Sales
1. You will have limited car options due to their prices.
As mentioned previously, cars are expensive, especially the new models. Unless you have lots of money in your bank, some vehicles could fall outside of your price range. You will have to make your choices from the cheaper, less feature-packed options, which may not be your ideal vehicle. These more affordable cars may also be at higher risk of future breakdowns.
2. Just like that, you have no more cash.
Buying a car will drain your savings fast. Once you use that money, you can’t have it back. This scenario can leave you in a sticky situation in the case of emergencies.
3. It will take time for you to save up again.
Once you have used all your savings to buy a car, it might take some time before you can save up again. Or, if you do not have the money yet, it can take a while before you can actually buy the car.
About Taking Out a Car Finance Product
Advantages of Applying for Car Financing
1. You will have an expanded choice of cars.
For as long as you can comfortably afford the repayments, you can apply and use car finance products to help you afford quality vehicles that are on the higher tier. Since you have a more extensive range of choices, you can choose to buy a car that is better suited to your needs.
2. You can improve your credit history.
Whenever you borrow money, the lender will check your credit history. If you consistently pay your loans and debts on time, you can show the lenders that you are not a risky borrower and you can potentially improve your chances of being approved for credit in the future.
3. You keep the money you saved in the bank.
Instead of using up all your savings and emptying your bank for a new car, you can apply for car finance products. You can avoid the risk of financial hardship in case of an emergency. A car loan can let you stretch out your car payments for months or even for several years. If you can carefully budget your earnings, then you can cover your monthly repayment.
Disadvantages of Applying for Car Financing
1. Borrowing money from a car finance company can be more expensive in the long run.
If you borrowed some money to buy your car, then the interests and other fees might make the costs more expensive than the original price. You should do your research regarding the car financing product that you are considering and find out all about the total cost of repayments, interest, fees and other charges. Only then can you decide whether you think that the price is worth paying.
2. The financing product may limit car choices.
Although your car finance product allows you to have a wider variety of car choices, the terms of your car loan can restrict you to specific vehicles.
For instance, secured car loans generally use the value of the vehicle you’re purchasing as collateral to guarantee the loan. Since this is the case, you are limited to buying more expensive new cars. They can even limit your choices to particular vehicle makes and models. The lender or car financing company require it, so your vehicle retains its value for longer.
In comparison, you can use unsecured car loans to purchase any vehicle, but because they don’t require security, their offers usually have higher interest rates. On top of that, they expect their borrowers to have a better credit rating to apply successfully.
3. Your car might be at risk.
Most car finance companies use the vehicle as security. In the case that you fail to make your repayment and default on your loan, the lender can repossess and sell your car to cover their losses. If you default on your loan repayments, then you are already at a difficult place financially. Losing your car can double your struggle.
You are the only one who can determine your financial capacity. You can choose to pay your car with cash or through the help of a car finance company. You should pick the option that will not put you in a difficult situation. Remember, always do your research so you can make informed decisions.