Paying all the cash up front to buy a car is okay, but sometimes raising the whole amount may seem like a tall order and may kill your dreams of being a car owner. In between saving and managing your bills, you may end up not saving enough to buy your dream car. However, with car finance, you can get one without compromising the brand you want because of finances. First, let us quickly look at the benefits and shortcomings of buying a car with cash.
- You do not have to worry about monthly or weekly payments.
- No interest rates to pay for.
- According to the current interest rate, saving up money in the bank will give you nominal interest.
- It will take some time before saving enough.
- You may lack enough money to cater for other bills and emergencies.
- You may get higher returns if you invest the cash elsewhere since a car depreciates in value.
If you are still undecided about taking a car loan, then here are some benefits of financing a car purchase.
You Can Get The Whole Amount For A Purchase
If you opt for financing a car purchase, you can borrow 100% of the car’s cash price and take it home with you on the same day. How good is that? Saving can be challenging, more so if you have financial commitments which may derail or even hinder you from purchasing a car. Therefore if a monthly or weekly finance makes sense for you, then take it and drive off.
Car Finance Can Reduce Your Tax Liability
For business owners, borrowing money for car purchases, the costs may be tax-deductible. Nevertheless, it’s always good if you liaise with your accountant before making the purchase. However, it is impossible to ask for a tax deduction on car finance if you are a salaried employee. But if you are a business owner, you should go for the car finance option.
Car Finance Helps In Building Your Credit
If you pay up on time, you will have a positive rating which automatically increases your credit score. You’ll see the importance of good credit history when you need money to finance other projects such as mortgages. Generally, being on the good books of a financial institution opens up more doors for you to get even more money. On the contrary, if you miss payments, it can affect your credit score negatively.
Lessens Your Financial Burden
Emptying your account to buy a car, especially if you are a middle-income earner can drain you financially. Car finance, therefore, allows you to hold onto your savings and the little you earn. Buying a car does not mean you break the bank or sacrifice doing the things that you love to save up for it. Additionally, when purchasing cash, one may opt for a second-hand car due to the stringent budget. The second hand may, in turn, become a financial burden, especially if it has mechanical issues, and you may end up spending more on its repair. With a new car, you can be at peace knowing that you will need such maintenance after you have enjoyed your ride for quite some time.
You Get The Car You Have Always Desired
We all picture ourselves in cars we would like to drive. Taking a car loan means you’ll have enough money to buy your dream car, at least for most people. On the other hand, purchasing with cash means you have to restrict yourself within your savings or the specific amount you have at hand. Of course, you’ll be working on a budget even with the car loan, but you will have a plethora of options to choose from.
No Collateral Is Needed
Taking a car loan is one of the easiest things since you do not have to give your car finance lender anything in lien. The car always acts as collateral. Therefore if you are worried about being asked to deposit any chattel to your bank, you can relax because none is needed. If you fail to pay, then the car will be seized by the lender. So as long as you maintain the payment deadline, you keep the car.
Improved Financial Discipline
For some people, it awakens their need to plan their finances. It is because they will have to readjust their usage and lifestyle to accommodate the new income after deduction. After deciding the amount, you will be paying every month, and you will not be overspending since there is an added responsibility.
In conclusion, financing a car purchase seems like the best option on the table currently, at least for most people. It’s okay to cringe at the idea of having to pay off a debt every month for an extended period. But looking at the benefits, it is something worth trying. The money you have been saving up can be used to handle other emergencies or bills.