Brand new cars are typically worth tens of thousands of dollars. Purchasing them outright is a difficult task for most people. Instead, they resort to financing to get the unit while paying the amount in small increments. This works well for some but not for others. Below are some things to consider with vehicle finance:
Vehicles are Depreciating Assets
Having a car can make you look and feel rich but it actually does the opposite to your personal vehicle finance. Remember that cars are depreciating assets. Their value decreases with time due to wear and tear. You won’t be able to sell it for as much as you paid for it. The first few years see the greatest decline, after which the depreciation gets more gradual. Knowing all of these, plan your purchase more wisely. Do not spend more than what is necessary as you are likely to lose have of the original value in 5 to 6 years.
When to Get New or Used
If you haven’t had a car before, then you will probably tend towards buying a new model. This is considered as the safer bet since you can be sure of the unit’s prime condition. You also get the benefit of a long warranty and good support from the dealership. If things go wrong, then you won’t have to worry so much about repairs and replacements. Buying used cars takes more savvy since no two units are alike. Previous owners may have taken good care of them, but maybe not. You can buy them for a much cheaper price.
Buy Cash If You Can
Getting a car loan means being in debts for a few years. This can be extremely stressful, especially when you run into unexpected financial challenges such as medical emergencies, divorce, and job loss. You will also have to pay more for the privilege of owning a car because of the interest rate. If you want the smallest payment possible, then buy cash. You won’t have to worry about making the next month’s payment. Go used if you have to with due diligence.
Pay Loans Quickly
Longer terms mean smaller monthly payments but they also mean higher interest rates. Pay loans quickly to avail of lower interest. If you get a windfall of cash, then you might pay the balance outright for peace of mind. You will be doing yourself a big favor.