No matter if you are looking for your first car or your 10th, purchasing a vehicle is no small task. You will want to choose a car that meets your needs, but the one you pick should also fit comfortably into your budget. Some people make the mistake of rushing without a plan in mind, and they are taking a big risk by doing so.
When a new car is on your mind, you have several options at your disposal on how to become an owner: you can either buy, lease or finance it. We will take a closer look at each of these options. You can choose any path you like, but weighing the options carefully is vital if your goal is to find a good fit for your lifestyle. Let’s see what benefits and drawbacks each of these options come with.
Paying in Cash: Simple, Convenient and Often Out of Reach
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Paying in cash is the most convenient option of paying for your new car.
Advantages of Paying in Cash:
- There is no lending process, so you won’t need to worry about interest fees or other charges that are associated with getting a loan. You will own the car right away, and you won’t need to stick with a pre-determined insurance plan or give the car up after several years. Once you pay for the car, the car is yours.
Paying in Cash Drawbacks:
- The biggest limiting factor is that most people don’t have enough money in their checking account to buy a car upfront, so this option is more common for individuals who decide to purchase used cars. Although you might have the needed funds in your savings account, using that resource is a risky move.
- By paying in cash, you are limiting yourself, as paying by other means, like leasing or financing, can get you a newer vehicle in most cases. Also, paying for a car with cash can make it difficult to afford any unexpected expenses that you might encounter in the future.
Leasing a Car: Drive a New Car Every Few Years
Leasing is a popular choice among consumers, and it comes with many great benefits that you won’t want to ignore. When you lease a car, you will have the ability to get a new vehicle every few years, so you will always be behind the wheel of the latest models with the most advanced safety and entertainment features. Like renting an apartment, leasing a car gives you the right to access and drive the car as long as the contract is valid.
Advantages of Leasing:
- You get a new car every few years: After your contract has expired, you return the vehicle to the finance company, and you will have the option to choose another car that appeals to you. This is exactly why leasing has become so popular – there’s no need to worry about selling or trading your old vehicle, and this will save you a lot of time (and nerves).
- The Payments are Lower: Another advantage of using this method is that lease payments are lower than loan payments, and the there is no down payment, which is typical when financing a car.
- You Don’t Have to Worry About Repair Bills: Another benefit of leasing a car is that the vehicle will most commonly remain under warranty for the duration of the agreement. This is great news, as you will not need to worry about paying expensive repair fees if something goes wrong.
- Tax Bonus: Also, those who use their leased car for business purposes more than 50 percent of the time will enjoy an excellent tax bonus as well.
Leasing Drawbacks:
- Determining The Value of the Car is Tricky: When the finance company sets your monthly payments, they will base the amount of the payment on the expected value of the car at the end of the agreement. This doesn’t sound like a problem really, but you should know that this estimated value is usually higher than the actual value of the car once the agreement is over.
- The warranty DOES NOT apply if you cause damage to the car. Should this happen, the finance company will ask you to compensate them for the decreased value. With this information in mind, you always want to take care of your leased car so that you can avoid extra fees.
- There’s a limit on the annual mileage. When you sign a lease, you will also agree not to drive your car farther than a predefined distance, and if you do, you will need to pay for the extra miles. The leasing party will usually set the limit between 10,000 and 15,000 miles for each year, so you will need to understand your driving habits. If you go over the limit, the finance company will charge you for each additional mile, and it can quickly add up.
Financing a Car: The Most Popular Method By Far
Of all the methods of obtaining a new car, financing the purchase is the most common and popular method.
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Car Financing Advantages:
- Paying on a Monthly Basis: When you decide to get loan to buy a car, you will know how much you need to pay each month, and paying for it over time won’t hurt you as much as buying it with cash. The monthly loan is often higher than a lease payment, but you don’t need to return the car after you pay up.
- The Car is Yours Once You Pay: Once you have made the final payment, the car will be yours, and you will be able to do anything you want with it. You can continue to drive it, or you can sell it, or even get some upgrades.
- Reasonable Interest Rates: Although it’s possible, getting an auto loan with 0 percent interest is rare, but because the loan is secured, you will usually enjoy a reasonable rate.
Car Financing Drawbacks:
- You Depend on Your Credit Scores: The factor that prevents most people from getting a loan is their credit score, and if your rating is less than 600, things aren’t looking well.
- You Need to Make a Down Payment: In addition to needing a good credit score, anyone who wants a loan will have to make a down payment. Although the amount is not set in stone, you can expect to pay 10 percent of the car’s value before you drive it off the lot.
Final Thoughts
Getting a loan, signing a lease, and paying with cash are the methods from which you can choose when you are ready to get behind the wheel of a new car. The choice that you make will impact your life in a significant way, so never rush the process. Although deciding on which path to take is a challenging task, looking at your lifestyle will make it that much easier.
If you have the resources, paying with cash is likely the best move, but signing a lease is ideal for anyone who wants something new every few years. You might wish to own a car without using the money in your savings account, and getting a loan could be a good fit for you. If you are still unsure about your next move, take some time to reflect on your lifestyle and to review this information again. The right answer will then become clear, and you will find a car that is perfect for your lifestyle and your budget. Armed with the right strategy, you will be able to make your final decision with confidence and peace of mind.
The post Buying a Car & Financing Options: Lease, Loan or Cash? appeared first on Proctor Cars Magazine.