Cash, loans and leases can all be good ways to get a new or used car. Choosing the right one for you depends on your financial goals and how you buy and drive your cars. While paying cash has the benefit of saving you from going into debt and means that you won’t pay interest, auto financing can make a newer or more reliable car affordable.
As long as you can secure the title upon purchasing the car, paying cash means that your car will be yours for as long as you want to keep it. You won’t have to deal with any restrictions from a finance company. And, since you won’t be paying interest, your car costs you exactly the price you agree upon with the seller. However, given that the average new car can cost more than $30,000, this option may be out of reach for many people.
Taking a Loan
When you take out a loan, you spread out the cost of your car over time. In exchange for giving you money up front, the lender usually charges you interest. This means that, when you figure in the interest, taking out a loan can bemore expensive than paying cash for a car.
Furthermore, the loan’s interest rate will sometimes vary based on your credit standing. As such, it’s a good idea to check your credit score ahead of time to make sure that you’re presenting the best possible financial profile.
Leasing a Car
Leasing a car can give you a lower monthly payment than if you financed the car traditionally. When you lease, you essentially rent the car for the period that you have it and will have to return the car once your contract is done. Since you’re paying for the use of the car, it can sometimes be less expensive. If you like to drive new cars and are willing to have a car payment for as long as you lease, leasing might be a good deal for you. It also can have tax advantages if you use your car for business. An auto lease calculator can help you determine if this is an option that fits for your financial profile and lifestyle.
Negotiating the Price of the Car
Regardless of how you finance your car, a good negotiating strategy can usually save you money. Thoroughly research the value of the car you’re thinking about buying, depreciation and maintenance costs. Before going to the dealer, consider checking your own credit report to see where you stand so you won’t be surprised by any information a financier might find.
If you plan to pay cash, inform the dealer that you will be paying in full and won’t need financing, and try to negotiate the price down as low as you can. Negotiating for price, rather than payment, will likely give you a better sense of what you’re actually paying.
About the Author
Solomon Poretsky has been a writer since 1996, with experience in the fields of financial services, real estate and technology. Poretsky holds a Bachelor of Arts in political science from Columbia University.
This article is provided for general guidance and information. It is not intended as, nor should it be construed to be, legal, financial or other professional advice. Please consult with your attorney or financial advisor to discuss any legal or financial issues involved with credit decisions.
Published by permission from ConsumerInfo.com, Inc. © 2014 ConsumerInfo.com, Inc. All rights reserved.