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Feb 24

A Closer Look At Car Financing

Reading Time: 3 mins

It’s important to have a vehicle, especially if you live in a country where there is insufficient public transportation and you need to go to work every day (it’s different if you live in London and there’s easy access to pretty much everywhere via the Tube!) There are certain countries where it is possible to easily afford a vehicle due to lower prices. There are also some people who prefer to get car loans as they find them more affordable.

Many people are unable to buy a car using their available cash. As a result, getting car financing via a loan might be their option. With that said, there are many pros and cons of doing so. You can choose from getting a dealer financed loan or a typical bank loan. Both of these loan types have their advantages and disadvantages.

 

Financing Via The Bank

The Advantages

Easy accessibility. Most places have numerous banks and this makes it quite easy for you to check different banks and find a good deal. There are even lots of tech based solutions such as websites that offer comparisons, and mobile apps that help people to get bank loans. You can opt for low APR car finance to save money on repayments.

The greatest advantage of getting a bank loan to finance a car is that you get to decide on your repayment plan. This means you can select how much you want to down pay and the best payment scheme that fits in with your budget and payment capabilities.

The Disadvantages

Unfortunately, there are many banks which are quite particular when it comes to choosing applicants. They will ask for lots of documents as well as thoroughly investigate your credit history to determine if you are trustworthy.

Additionally, you’ll need to pay lots of fees. Typically speaking, banks do have good interest rates, but your payment will be raised due to their numerous fees.

 

Dealership Loans

The Advantages

When you visit a dealership that offers financing, you can get everything at one place which makes it very convenient. In most cases, these dealerships don’t have as strict requirements once you can show you’re capable of making payments.

The Disadvantages

The interest rates at a dealership would be higher than a bank. Also, when you select a longer period to repay, the interest would get higher.

There are many car dealerships which do their best to sell as much as they can to customers, which means you can end up buying a more expensive vehicle than you can actually afford or even opt into various services or additional products that are unnecessary.

 

Compared to Paying Cash

One of the biggest issues with buying a new car is that it’s always going to depreciate and this means that any money you pay towards a car is going to end up being worth less further down the line.

Using your cash to pay for a car means you have less of a nest egg down the line and this can potentially cause you financial difficulties. So, if you end up with a broken boiler or a sick pet and end up struggling to find cash, you’re going to regret placing it in a car.

Finally, the amount you have in savings may cause you problems and mean you can’t actually afford the car that you want or need. Limiting your budget may prevent you from spending beyond what you can actually in fact afford and need.

So, hopefully this closer look at car financing will help you make a decision on purchasing your new automobile.

WHAT DO YOU THINK?

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