There’s a lot to be said for purchasing a vehicle that you can afford outright, without financing it and taking on hefty monthly car payments. If you have the means to do so, paying cash for your next vehicle is the right idea. You may imagine that everyone has to take a loan out for their new car, but the truth is that many people know the benefits of paying for a car with cash and take advantage of this option.
To understand why, you must first understand what a loan is. The bank or other lending institution isn’t just giving you money out of the kindness of their heart. Any type of loan has interest, including your car loan. Interest is basically a fee that is charged to a car buyer for borrowing someone else’s money. In this case, it is probably the bank’s money. What interest you end up paying can vary wildly, from 0.1% to 9% or more. The amount you qualify for has to do with your credit score as well as any offers or deals going on at the time you sign your loan. By paying cash, you avoid losing money in interest. This can add on thousands of dollars to your loan over the amount of time you pay off the car. On the other hand, if you pay cash, you would only be paying for the actual price of the car.
By paying cash, you are setting your future self up for success. This is because you won’t have monthly payments. Let’s say you agree to purchase a used car and pay $250 a month for the next six years. That is no big deal; you can pay that amount with ease. Keep in mind that life circumstances change. What if you lose your job? What if you have another child? What if you become very ill? All of a sudden, that $250 may be out of your reach and you’re risking a repossession. By paying cash, you won’t set your future self up for a payment you cannot make.
It usually takes time, commitment, and a bit of research to find a great used car for sale that makes it possible to pay cash for a car. Do not give up. It’s worth it! When you make the effort to find a great vehicle you can pay cash for and you’ll love the freedom of having a quality vehicle without making a monthly payment to drive it. If your life circumstances change in a year or two, you will have a reliable car that no one can take away from you. Plus, you won’t be wasting thousands in interest payments to uncrease the bank’s profits.
This doesn’t mean you have to get an old clunker. The used car dealership in Baton Rouge has plenty of great options with a sticker price of just a few thousand dollars. If you can save up anywhere from $5,000 to $10,000, you’ll have so many options you’ll wonder why you never thought of doing this before!