Making a big cash purchase only can be a good idea, you will not pay interest and you will not have to make payments for years to come. The same thing applies when buying a vehicle and there are many people (probably even your relatives or friends who belong to it) who believe that you should not buy a car before you can pay for it completely. in cash. We agree with that, but do not think it’s necessarily the best idea or even possible for the average Canadian. Buying a car is a serious decision, which must be properly included in a budget. But they are still necessary for most people, for transportation from home to work mainly. A new vehicle or a little used and reliable vehicle can cost up to $ 10,000, so getting a car loan is usually more realistic and let’s see why.
Money is king
There are many ways to spend your money so hard earned and you should use it for a down payment on a home purchase or to pay off a high interest credit card debt. You should take your life by the reindeer and invest your money in something that will come back to you bigger. If you are part of the average Canadian who lives in a smaller town adjacent to a big one, a car is surely a necessity for you and so, just like for all your other expenses; budget your paychecks accordingly. Having cash available is important, but using it in full to buy a car could ultimately hurt you.
Will your money take you to a reliable vehicle?
It can be difficult to save for a big purchase, which means you might not have enough money for a reliable vehicle. Using your hard earned money to buy an old vehicle that could bring you a lot of costs is not necessarily a good idea. You have to imagine the worst and foresee all the problems that might arise from the purchase of this vehicle, less expensive but old.
Betting less initially could end up costing you a lot.
What about your credit?
If your credit rating is low, you should take a car loan; this one will help you increase your credit rating. Cash purchases have no authority on your credit; this is sometimes a good thing but if you want to improve your credit rating, a car loan can help.
If you manage your loan responsibly and make your payments on time, your credit rating will increase. What’s even better is if you can use some of your money saved to help you make payments while improving your credit rating.
Do you have an emergency fund?
Buying a vehicle with your savings to avoid interest may seem like a good idea, but having zero money is really not a good idea. If you need to break your pig to buy a used car, review your plan. Having an emergency fund that you could use for a few months when needed or to cover some unexpected costs, such as car repairs, is one of the best financial decisions you can make.
Is financing the right option for you?
Once you have received everyone’s opinion, only you can make the final decision. If having an emergency fund for possible expenses or for future investments is important for you, a car loan seems ideal in your situation. But if you’ve been able to save money, buy a car, and still have a surplus for emergencies, buy your car in cash all at once.
No matter which option you choose, make sure it is the best fit for your current financial situation.
Need more information regarding auto loans?
Choosing the right lender for your next car purchase could mean the difference between saving hundreds of dollars and spending more than you should. If you are currently looking for a lender and need more information, contact us today. We can help you with all your auto financing questions.