Buying a vehicle is definitely a big deal for most of us unless you are rolling in cash and can afford to spend on a vehicle every year or so. Vehicles can be quite an expense, and you need to be sure that you are ready for this expense when you decide to buy a new one for the first time or replace an older model. But once you decide that buying a vehicle is your best choice, the next step would be to decide how you can pay for it. If you have the cash, paying for it outright may be the best answer, but even if you do have cash-on-hand, you may also be wondering about financing. Here’s all you need to know about financing a vehicle versus paying for it outright: which is best for you?
Paying for your vehicle outright
Cash is usually seen as the best method for purchasing a vehicle, and there are indeed a lot of good reasons why this is so. With cash, you are not in debt for a period of time, and you don’t have to worry about settling monthly payments. It’s a one-off payment, and once you pay, then you need no longer deal with monthly fees, mileage limits, and hefty interest rates. Also, when you pay for a vehicle in cash, it’s the cheapest option because you may also be able to avail of more new car deals for outright purchases that are not given for financing deals.
When you pay in cash, you don’t have to deal with any credit check, either, and once you have the vehicle and decide you don’t want it in the end, then you have the option to sell it at any time. Your vehicle can be an asset in case you need money at some point because you can easily sell it or trade it and then just buy another vehicle later on.
Buying a vehicle on finance
You have different options in terms of vehicle financing, and it includes PCP or personal contract purchase, HP or hire purchase, a vehicle lease, using your credit card, or availing of a personal loan. The thing with financing, however, is that it comes with its merits, but it also comes with certain disadvantages. One disadvantage, for instance, is that you have to settle interest on the vehicle, which would be an additional expense on top of your monthly budget. It can also be difficult to terminate a contract or agreement once you are in it, and you may be dealing with fines as well. You may also deal with mileage limits (and additional charges if you go over this limit), and your credit rating will be checked and may be negatively affected if you renege on your payments. It can be a good option, however, if you don’t have enough cash to pay for your vehicle outright, and you can take advantage of fixed payments per month as well.
In the end, the final decision is really yours to make. Consider your finances, your savings, your monthly expenses, and your needs. If you have the ready cash, there really is no reason not to pay for your vehicle outright – but make sure you have enough savings left over as well.
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