Buying a car is usually a big financial step for anyone – regardless of whether this is their first car or a replacement for an older one. If you are like most people in this situation, you have probably asked yourself (and probably more than once) whether or not car finance is really worth the trouble.
The definite truth is that nobody can tell you whether car finance is “good” or “bad” – because this depends on your particular situation. Like with everything else in the world, car finance comes with advantages and with disadvantages as well – and you should make sure to consider both before making any step.
Read on if you want to find out more about some of the things you should know about car finance, its benefits and its less-beneficial parts.
Pros of Using Car Finance
Car finance comes with very attractive benefits that are worth taking into consideration regardless of what kind of car you might want to buy. Here are some of them:
1. Saving money for a new (or used) car can take a while – and this means that you may be left without a car until you manage to save the money to buy it. Calling to the financing options out there can give you fast access to a new car and it can make the financial effort feel more evenly spread over the course of time too.
2. Down payment. Some car financing options do not require you to make a down payment of any kind – which can be very advantageous if you want to avoid spending more money at once.
3. In some cases, financed cars will be warrantied for as long as the finance lasts. This means that you will not have to pay maintenance costs for your new car. Consequently, this means that you can probably afford driving new and better cars every few years.
Cons of Using Car Finance
As mentioned in the very beginning, there are some disadvantages to financing a car as well. Here are some of the most important/common ones:
1. Interest rates. If you finance your car, you will not only have to pay the price you initially agreed on, but the interest rate as well. In the long-run, this will end up costing (much) more than the original price of the car.
2. Since you are not paying in cash all at once, you may not perceive this as a huge cost in your life. However, it is. And not being careful about your choice can make you end up with a car that’s much more expensive than you can actually afford.
3. Credit score. Having your car financed means that you will have to put up the car as collateral. In other words, if you fall behind your payments, your car will be taken away from you. Not only is this an awful moment and not only will you be left with no car at all, but the entire event will leave a huge mark on your credit score too.