Car financing and buying a car outright? These are two very good questions that need to be answered. Both have their own pluses and minuses, but what you choose to do with your next vehicle is ultimately up to you. Many people believe that buying a used car makes more sense financially in the long run because the interest rate is lower. Others believe that the car is much more valuable when they buy it new and drive it themselves.
There are pros and cons for each, and people who are interested in buying a used car can go to their local bank or credit union and inquire about financing options. Banks take pride in having their customers succeed, so many will help an individual get a loan if they have been turned down elsewhere. For those who want to sell their car, they may be able to finance through the car dealership, but this option can come with a high markup on the price of the car.
Car financing can either be done directly with the dealership, which will include monthly payments and a down payment that must be paid upfront, or it can be done on your own through a car financing company. The advantage to dealing with a financing company is that it allows you to shop around for the best deal and you can get pre-qualified for a number of loans. Car dealerships do not offer this because they do not deal directly with consumers. This is because they want to keep all of the profit from a sale of a car and do not want to take a loss on the loan. The last thing that they want to do is give an individual a loan.
So, which option is better? In general, those who shop for a car and then turn around and sell it directly or hire a car financing company are better off going with the second option. This will allow them to pay less and get a car loan that they can actually use. The downside is that they will probably have to put a small amount down. If they decide later that they would like to buy a second hand car, they may have to start paying extra money to have that vehicle covered by a loan. There is also the risk that the vehicle may not sell and they may end up with a car they cannot drive.
On the other hand, those who finance a car usually get a good price, because dealerships or car loan companies set up a special loan for them. The only disadvantage is that they will have to pay extra money up front to start the loan, but the monthly payments will be much lower than what they would pay if they bought the car from a private party or from the dealership. Even so, this is still better than driving the car off of the lot and having someone pay for it. Another benefit is that the loan has a fixed interest rate and may not change over the course of the life of the loan. This means that the consumer is not getting into debt over a car that they can not afford to pay off, like an unsecured loan might.
Regardless of which route a person takes, they should always shop around and compare the different rates and terms. If you are planning on buying a new car soon, then you should look into getting a financing loan. However, if you are planning on keeping your current car or used car until the next several years, then you should consider buying it directly from the dealership. This way, you can be sure that you will be paying the lowest interest rates possible and can shop around for the best deal. So, is financing a car or buying outright?