Buying a new car is an exciting experience, because you have plenty of different choices on the car lot. But before you get too excited by the shiny paint jobs, you need to think about how you’re going to pay for the car itself. Do you want to finance the car, or do you want to pay for all of it in cash.
There are some reasons to pursue each one, and it’s really important that you start looking at your choices very carefully. One of the first things that you will want to do is make sure that you check your credit report. You can’t decide which way to go if you don’t know what tools you have on your side of things. You want to look, for example, at how high your credit score really is. Lenders will finance at all sorts of different ranges, but you will get the best interest rate by having a good credit score.
From here, you also want to look at how much money you could bring to the table in a deal. Some people feel that if they’re going to finance the car, they shouldn’t have to pay anything up front. But this is a great way to negotiate down to a better rate. When the financing company sees that you’re bringing money into the deal yourself, they’re a lot more likely to make room for you at the table. On the other hand, if you don’t come with much of a down payment, they might see this as a sign that you could default in the future.
Having the upfront money to go to the car dealership and pay for the vehicle in cash is good. But if you could get a 0% car interest loan with good credit, then that’s even better. It’s going to be an introductory rate and then switch over to a modest interest rate later in the loan, but you could still save thousands of pounds with an offer like this.
If you’re in a bad place and you absolutely need a vehicle, then financing can be your only option. If you can, bring a trade in vehicle with you, along with a decent down payment. It can make the difference when you’re really trying to get back on your feet. The financing company reports your payments to the credit bureaus, so this is also a way to improve your credit. But take caution, because late payments get reported as well. And if you fall behind to the point where you have to get the car repossessed, this will be a big negative mark on your credit report that’s hard to take off in the long run.
Keep in mind that if you finance a vehicle, you will be required to carry full car insurance at all times. With a car that you buy outright, it’s up to you to figure out what insurance product is best. If you only wish to get liability coverage, that’s your decision. But with a car that’s being financed, you basically have to protect the lender’s investment, as well as covering the other driver in the event of an accident that you’re at fault for. Make sure you also set aside enough cash to handle your license plate fees and taxes.
It’s way better to make sure that you prepare yourself before you just walk onto the car lot. This is why the choice between a car loan and a cash deal is so difficult. Believe us; they will come out with some hot offers to get your attention. The dealership will make a lot more money upfront from your purchase than they will on the cash deal. But at the end of the day, you have to do what’s going to be in your best interest first and go from there.