When the time comes to purchase a new car you have several different options for payment. While car loans are the most common, you can also look to credit cards, money in your savings account and even trading in your current vehicle. Let me go into detail about each of these car buying options.
There is a reason that car loans are one of the most popular ways to pay for a vehicle. Newer cars especially cost more than most individuals or families have on hand. If you purchase through a sales lot or a dealership, they are more than happy to get you approved for a loan with a variety of different financing companies.
One of the benefits to a loan is the fact that the interest rate is typically pretty low if you have at least average credit. If you are a payment buyer, you can try to get your payment into the correct range by having a salesperson run the numbers of the loans for you.
It is important to note that because there is outstanding money due on the vehicle, you will need to keep full insurance coverage on it. On the down side, you will end up paying more than the original cost of the car. The minute you drive off the lot, the value of the car decreases and you may be paying more for the car loans than it is worth.
In order to decrease the amount that you owe on a new car, you can trade in your current vehicle to the dealership or sales shop. They will use this “money” or credit towards your new purchase. They look at the vehicle and evaluate how it looks, how it runs and the maintenance that you did while you owned it. Based on these facts you will get an dollar figure.
For most people, the purchase of a used vehicle means that they can use money from their savings accounts to pay for the car. For some, this is a relief as they will never have to make a car payment. It means that as you drive off the lot, you own the vehicle free and clear without the use of any loans. For some people, this is a very empowering feeling.
However, on the down side, this can end up being a sizable amount. It may take all that you have saved up to get the car and mean that you will not have any funds to be able to fall back on. This can be scary and create a sense of anxiety for individuals not used to having money in the bank.
You can opt to pay for a vehicle using a credit card. Most people avoid this option because of the high interest rates that are typically charged for the amount placed on the card. It could mean that you are paying way more than the car is worth and end up paying on the credit card statements longer than you own the car.
However, if you don’t have good credit, a credit card may be the only possibly option for purchasing a car. In this case, try to make sure that you are using a card with the lowest possible interest rate and some type of rewards program that will give you a perk for the purchase.
When it comes to buying a vehicle, each person should choose a method of payment that works best for them financially. Look at each option, whether it be car loans, a trade in, savings or credit cards and decide on a payment that will cost you the least and give you the most in return.