Quick Guide to Help You Finance or Buy Your Next Car


The time has come to give serious thought to getting a new car, but the dilemma arises: “What’s the best way to get a new car, buying or financing?” 

Well, the answer is simple, but then again, it isn’t at the same time. While paying the full sum up front is perhaps the best option, most people don’t have the means to pull it off. 

There is a solution though, and it’s quite a cost-efficient one: finance your next car. Financing is so popular because it offers plenty of good benefits to make paying it off much easier – low payments, one-month refundable security deposits, and so on. 

Financing is cheap and is meant to give people with limited finances a chance to buy a car they want at reasonable prices. 

The Reason Behind Financing Payment Cost-Efficiency

There are three important things when it comes to financing your next car:

  • Ownership or equity
  • Depreciation – any equity loses value in time
  • Interest expense

The entire point of financing or buying a vehicle is to eventually own it. If you buy it for cash, you own it immediately. If you finance it, you own it when you pay your last payment but, if you lease, you don’t pay for all three things like in the previous cases. 

If you choose to lease your car, you don’t pay for the interest, depreciation or the equity, just the use. So, considering leasing is the best option if you’re on a tight budget.

Leasing gives you the possibility to only pay for the difference between the current price and the price it will be worth when you’re done using it.

Residual Value

Since any new vehicle will retain a certain price, you will pay lower monthly payments. The truth is, the car dealer is setting the price the way they see fit. That means that residual value is not involved in the equation – it’s their own prediction. That’s why so many people find leasing attractive. They get an opportunity to buy cars at lower prices.

Buying Your Next Car 

The whole process is quite simple. You find a dealership that has the model you want on offer, and if the price is reasonable, you go for it. There’s no interest, no monthly payments, no worries. 

The biggest problem people have when considering financing their next car is the interest because they end up paying more than they would when buying with cash. The thing with financing is pretty simple, as well. It makes no sense to pay more for something that will be worth a lot less in time. 

The more you drive it, the less it’s worth. Then, you have a situation where people want to buy a model they simply can’t afford. With cash, you pay for a vehicle that you can afford, no more, no less. Therefore, the most recommended thing to do is buying your next car with cash.

Additionally, the price of a vehicle depends on many things, such as configuration, dealership fees, and so on. The actual price is the sum where all extra fees are included. When presented to a potential buyer, it doesn’t seem that appealing, but it does have certain benefits. 

Buying your next car with cash means:

  • No interest
  • You’re spending only the money you can afford
  • You control the costs
  • You get additional flexibility when it comes to insurance
  • No monthly payments
  • You own the car after you make a purchase

The downsides are few, as you need to have the cash available at the moment of the purchase, and your selection depends on affordability. Still, it’s better to buy a car that you can really afford without compromising the quality of your life than to spend money you don’t have. Financing means debt despite the fact that low interests look good on paper.

Financing Your Next Car

The entire point in financing your next car is to buy one that costs more than you can afford. For that, you pay a certain interest. Even though it all seems easy, it has certain pros and cons. 

For those who can’t afford to buy the model they want with cash, but can afford it through financing, this is a good opportunity to get a luxury car. Still, if you’re on a tight budget, sticking with what you can afford is still the best option.

The Pros

When it comes to financing, there are some essential things to keep in mind before you make a decision:

  • Financing doesn’t require you to spend a large amount of cash in one go.
  • Making all your payments on time looks really good on your credit score.
  • The eligibility for a loan with zero interest depends on your budget.

The Cons 

While pros may look good, there are certain downsides when financing your car:

  • Financing makes you spend more than you can afford.
  • You pay more than the actual price of the vehicle.
  • Monthly payments are a must.
  • Skipping payments will not look good in your credit report.
  • More debt affects your credit score in a negative way.
  • The interest rate depends on your credit score.
  • Bad credit means higher interest rates.

With all this in mind, buying or financing your next car is an important investment you need to make and before you decide, you should consider all these points. 

You will want to avoid high interests without any doubt, so buying with cash is always the best and most recommended thing to do.

If this isn’t the option in your case, you can finance it, but make your payments in a timely manner, as there’s more to worry about than bad credit reports. 

It all comes down to what you really want and need and what you can really afford. Take your time and think things through before you decide.