For those of us who have been around for a while know that buying a car isn’t as simple as it may seem. In fact, there are some very important things to take into account before you make your purchase. After all, no one wants to end up with a lemon on their hands. That’s why we recommend taking the time to put together a budget so you can stay within your means.
However, if you are one of the many people who have decided to go through car dealerships for financing, then you should know that it’s not your only option. You see, there are plenty of third-party lenders out there who may be able to offer you better rates. In fact, they may be more than happy to loan you money so long as you have a good credit score.
Today we’re breaking down the pros and cons of getting a car loan so you can decide if it’s the right move for you.
The pros
You don’t have to pay all (or any) of the purchase price up front
With today’s high-end vehicles, it can be extremely hard to afford one by paying cash. After all, new luxury cars are often priced at over $50,000. Since that’s more than most people can afford on their own, it usually means they’ll have to go through dealerships for financing.
Saving your down payment for other things
We know how important it is to save money before making a big purchase like this one. That’s why we recommend putting together a budget and only spending the amount of cash you’ve saved up. However, if you don’t have the funds to cover a down payment, then getting a car loan may be your only option. Of course if you have other things in mind for your money, then it may not be worth the high interest rates.
You’re able to buy your dream car immediately
In some cases, you might find yourself in a position where you want to buy a dream car that costs too much to pay cash for. In this situation, car loans can your best option because it means you won’t have to go without the vehicle you need. We know it’s not ideal since they will require high monthly payments and interest rates. However, that might be a small price to pay if it means getting the car you always wanted right now rather than putting it off for another day.
Make sure you check if there are any car loan deals specific to your city, if you’re in WA and after car loans in Perth you can compare your best local personalised rates with Driva.
The cons
More expensive long term
The major downside of getting a car loan is that you’ll end up paying more in total than if you’d paid with cash because you’ll need to pay interest and fees for the duration of the loan.
You’ll have to make those high monthly payments each month
Since you’re only paying a fraction of the actual cost of the vehicle when buying with cash, you can usually make smaller monthly payments. This can be extremely beneficial for people who are having trouble making ends meet each month since they don’t need to stress about paying off the whole car in one go. However, as a result, you might find yourself not being able to pay it back in time, which means more interest will begin to pile up on top of your loan.