Buying a car, whether it is new or used, can be a very expensive process. It can be the costliest thing you buy next to your home.
Because of this, many people choose to finance their acquisition of a car, so that they can spread the payments over time. However, if you are fortunate enough to have the money to buy your car outright, should you? Or is taking out a car finance deal ultimately a superior choice to paying the entire cost immediately upfront?
It’s probably the case for most people that the only way they can afford to buy a car is through finance. Getting the car you want can be expensive, so being able to pay smaller amounts each month makes it easier to get behind the wheel of a newer car.
Some car dealers help make available car finance in Dartford and Gravesend as well as other parts of the country. They can offer a good finance option to help you buy a car. You can then arrange an affordable repayment plan that you can follow while using the car. This is often a quicker way to get a car instead of saving up for it.
Agreeing to a car finance deal can also be a good way to improve your credit score if you are approved. If you have just left school or college, then your credit score will be new, and you will need to get some credit to build up the score. As long as you keep up the repayments, your credit score will go up.
One of the biggest negatives of car finance is the fact that you will often be charged interest on your finance deal. Although there are deals out there that offer 0% interest, these often have restrictions that are not compatible with used cars.
At the end of the credit agreement, you might then have the option to use the equity to buy another car. However, this can mean a never-ending cycle of car payments. The other option is often to pay the rest and buy the car, but you might not have the funds to do this in one go.
Another disadvantage is if any problems arise while you are paying the car finance. If you lose your job or have a cash issue, you will go into default, and this will negatively impact your credit rating.
If you want to pay for a car outright, then the process is relatively simple. You pick out the car you want and pay cash for it straight away. Apart from tax, insurance, and fuel, you won’t have any other money to pay. There will be no credit check or any other delays in getting your car.
Another advantage is that there will be no restrictions on you once you get behind the wheel of the car. Finance agreements can impose mileage caps and you can’t modify the car until the finance is paid.
Selling the car will also be easy, as you can part-exchange it without having to clear the old finance first. You will also get the whole value of your old car towards the new one.
Buying a car outright can be a good way to ensure you are balancing your account without having finance. It also means that you won’t have to keep paying more money each month, so you will be able to save money again for another car in the future, without the burden of interest.
When buying a new or used car outright, you will be buying something that will quickly depreciate in value over the first three years. Although this is less for a used car, you will never make your money back on it.
If you are just starting out after school or college, then you won’t get the benefit of improving your credit score if you buy outright. It might therefore be better to use some of the money as a downpayment on a car with finance and build your credit score.
Some car dealers have offers on used cars when taken out with car finance. If you buy a car outright, you might not get the same deal as you would if you took out car finance.
The amount of money you save may have an impact on the type of car you can have. If you want to have a high-specification car, you might not have the savings to buy one outright. This will limit your choices and may result in you not getting the car you really want.
There are pros and cons to getting car finance and buying your car outright. It all depends on what is right for you at the time you buy your car – so you should be sure to carefully think about your options to help make yourself certain that you are making the right choice.