Should I Buy, Finance Or Lease My Next Car?
A car is a great investment and individuals should find the best method to pay for one if they want to make the best financial decision. The most common routes for car ownership include paying for it outright, opting for car financing or leasing a car for a period of time. Each of these methods has its own advantages and disadvantages and we will discuss them in detail in this piece so as to help prospective buyers make the best purchasing decisions.
- Buying a car with cash.
Acquiring a car using this method is quite straightforward since all you have to do is walk into a dealership that stocks the model that you want and paying the full amount for the car in cash or using a personal check. You can use this method to acquire a brand new car or used cars in Frisco. The main advantage of this method of car acquisition is that you avoid the high interest rates that come with car financing using loans. When the interest charged for the cash advance is added to the cost of the car, individuals end up paying more for the car than is necessary. Prospective car buyers should, therefore, prioritize full payments when buying a car as it is the best option financially. The only downside to this method of car acquisition is that buyers are limited in their car options as they can only buy the cars that they can afford. This, however, is not a bad thing entirely as it prevents individuals from getting into bad debts and ruining their credit rating.
- Car financing using a loan.
This is another option that is popular with car owners. Individuals who don’t have the full amount needed to buy a car can opt for car financing where they take a car loan to buy the car and make partial payments till the debt is cleared. They will have to pay interest on the loans and this greatly increases the cost of acquiring the car. This method is beneficial in that individuals can own a car without having to pay the full amount in an instant. Individuals also build their credit rating when they pay their loans properly and this will help them qualify for bigger loans later in life. This method, however, is expensive in that individuals pay more than they should for a car.
With this method, individuals pay to use a car for a specific period of time. Individuals pay a monthly stipend for the entire period of the lease and when the lease expires, they have to return the vehicle to the dealership. The monthly fees are usually very low and people are increasingly buying into the idea of leasing over buying. The problem with this method, however, is that individuals don’t get to own the cars and are penalized heavily when they exceed the mileage restrictions. Leasing doesn’t build equity either and individuals cannot use them as collateral for loans.