Managing your finances should be an important part of your life, more so since we came to this time of turmoil and insecurities. Whenever you are getting something new for yourself you should pay close attention to everything.
Some will argue this, but in these times a personal vehicle plays a huge role in our lives. Most people tend to use public transportation or services like Uber and similar, but most of us need a car that will get us through our daily tasks.
Buying a car shouldn’t be a quick and haste decision from both a financial and mechanical standpoint. You need to find something reliable and long-lasting, especially if you are going second hand. This is very difficult but with some deep searching, a good mechanic willing to take a look before you buy, you will make your decision safer and easier.
When it comes to a financial standpoint you got two options for your new second-hand car – finance or cash. Today we will talk a bit about that and try to answer this dilemma and help you out with some facts. If you are on a hunt for a new, used car, then choosemycar.com is the right place to start.
When you argue cash over finance, you get a lot of people that don’t like debt telling you why going into debt, AKA financing your car is a bad idea. The car market is weird, it’s all up and down, it’s hard to track it sometimes and most people tend to lose money on their cars thanks to their vehicle price depreciating over a certain period.
Now others that need one now and can’t afford to wait until they save enough to buy it for cash will argue for financing because you will get the money you need ASAP and you will be able to make your purchase.
Truthfully the people that advocate cash purchases are in majority and most of them are die-hard fans of cash buying and most of them would never use finance for anything except maybe a home purchase. They are always tying in the debt factor and depreciating values of vehicles, which to someone uninformative would make sense but, we will try to explain why it doesn’t.
Here, we will give you two, there are probably more if you look harder, major reasons why we support financing your car and the one that is the most or at least should be the most obvious and that DEBT is cheap.
What does this mean? Well, when you say that the debt is cheap you are looking at interest rates that are low and affordable. Now, you need to have one fact in mind and that is that the rates of new vs. used vehicles are different for a reason. When buying a new car, you can typically get a better deal on your interest rate vs. the one you will get when going for a second hand or used car. The difference is not big so you can easily choose finance for a used car purchase. One thing that may go to your advantage even further is to pay one part with cash and finance the other where your interest rate for, let’s say $50,000.00 will not be the same as it would be if you are financing the entire $70,000.00 car.
You can look at this entire situation like this. If you had $70,000.00 in cash and if you paid for your car with that money, in cash entirely, over a certain period you would have lost money since the car is losing value. The big scenario that stands in favour of financing is that you put $20,000.00 down and finance the rest of your car – $50,000.00 and have that financed part invested elsewhere. Stocks are a neat thing and if you invest good and smart you may even see the return of finance charge for the entire loan in X amount of time.
The only reason that the “buy cash” people advocate this sort of buying habit is that they have a piece of mind, not thinking about interests, banks, turmoil and other things that impact the financial world, but in reality, they have a lot fewer assets for a bit of peace of mind. I think that we can all agree that we all prefer our money to work for us and to have it more than have a bit of peace of mind at the end of the day.
The second reason to finance your car, new or used, is when you have the money to comfortably purchase it. I hope we understand each other here. It will not be logically OK or sane to go and finance something over $80,000.00 if you make $50,000.00 a year. It is not good; the terms will not be good and you will be overextending yourself and putting yourself into a situation where you will not be able to finance the car through and where you will fall into pitfalls of debt no matter how low the interest rate is. Only finance what you can easily afford and use the money to work for you elsewhere.
The bottom line is that financing is good. The reason for that is because you can make the rest of your money work and make more money that can cover the finance charge in a short period if you invest well.
This also doesn’t apply to anyone and everywhere. Why? Well, the reason is that not all of us can get or will get such low-interest rates. Where they are low this is what you do, where the interest rates are high, buying your new or used car with cash has much more sense. The reasons for bad rates may be because of your bad credit scores, troubles before with foreclosures or similar things. Never mind what the reason for a bigger interest rate is, you just do not go over a certain amount. What is that certain amount, well, that is up to you and where you live. Interest rates are different all over the world and there is no one size to fit us all. You must take a closer look at your market and see if there is anything below or lower than what is offered on the market and try to utilize it. Anything close to the market or above a certain average, then the cash is your only option.