Buying a car with cash may seem like a smart idea.
If you’re looking to purchase a car, and you have the money to buy one in one fell swoop, this means you never have to make a payment.
Most people would assume that this is the correct path to take. However, there are some reasons why buying a car with cash may not always be the right move, even if you can afford it. Below we go into this a little further.
Buying A Car With Cash Versus Buying A Car With Financing
Before we get into the question of cash versus financing, there are some things that we should look at.
People looking to buy a car who have never bought one before should know there’s more to consider than what meets the eye. When buying a car, there are two ways you can do so.
The first of these is financing, which means that you pay the car off over a longer duration.
Alternatively, you can pay cash, which allows you to buy the car outright.
The difference with financing means that you end up with a better car then if you decided to just pay with cash. For example, if you have a small budget, say less than $10,000, you’ll have to go with a used car if you decide to pay in one go.
However, if you decide to go the route of financing, you can use the money to put a down payment on a new car. This, in turn, allows you to look at more options for purchasing. If your credit is good, this allows you to have your pick of many new models.
Of course, the downside to this is that you will have to make monthly payments in order to pay off the money used to finance your vehicle. Those payments will also include interest. If you borrow money, you’ll have a fee at the bank that allowed you to borrow the money, too.
Is Cash The Better Option?
Many people think that buying a car using cash makes more sense than financing because you have no interest to pay. Of course, when you pay with cash you pay the price that you see and nothing else.
Financing means that you have to pay any amount of money listed, plus the finance, so you will be paying more on top of the actual price of the car.
While this is true, there are some things to think about and there are differences depending on your situation.
A good example of this is if you can qualify for good interest on your dealer financing deal.
In this situation, going with cash may not be the smartest route to take. This is mainly because very little money will be lost if you choose to finance the car, and then you can use your money for other things or types of investments.
For example – if you have a sizeable sum of money to buy a car with, for example, say $30,000, you can choose to buy the car outright and not have any more payments.
But if you can find a good interest rate, something that is small, over a number of years with a little downpayment, you’ll still have plenty of money to play around with. This could be used for many different things and the interest would not be so detrimental.
Also, you never know when you may need the sum of money for something else.
You can have the money as part of your savings that you could’ve invested in something else. Especially in the case of the latter, you’d be able to make back that money very quickly.
Paying Cash For A Car
If you do decide to go with paying for a car with cash, you have to think about the ways in which you do so.
First of all, you should think about the amount of money that you can afford.
You have to think about how much money you can put to the side and how will it affect your financial situation or your goals.
Also, even though you could afford it doesn’t mean you should buy it.
Making such a large payment in one go can have an impact on your life. There are many other options you can use to help raise capital for your car. You could sell your current car and buy a cheaper one.
You may also need that money to help consolidate debts, or if you have an expected cost that you have to pay.
You should also look into budgeting for your car. If you need to budget for your car, look at how much you need to save to enable you to buy your next car outright.
Look at the price range of the vehicle you want to buy and how long you’ll need to get the money together.
Doing this in this way makes you compare the goal of purchasing the car to spending the money on something like a home or a retirement fund or even your child’s education.
Although buying a car outright can feel great, remember that the option of financing may be easier on you in the long run.
Buying A Car With Cash – It Is The Right Way To Go?
If you’re looking into buying a car with cash, there are a variety of options to weigh up. In short, the decision you need to make will vary greatly depending on your financial situation and your circumstances.
Looking for a great deal on a car? Take a look at some of the options we offer at Legend Auto Sales.