Is It Worth Financing A Car?
Are you currently in the market for a new or used car? If so, you may be undecided as to whether you should buy it outright or finance it. For most people, buying a car is a rather large investment and you want to ensure you do it right to save as much money as possible. Today we are going to examine if financing your next car is the right decision for you. Is car finance worth it? Car Finance Blog.
If you are planning on a used car, you are already going to save some money. This is due to the fact that the original owner took the hit on the depreciation value, which can be a substantial amount depending on the year of the model. However, this is only going to work to your benefit if you are paying cash for a used car. When you finance a used car, you lose that advantage. Let’s take a look at how this actually works.
Benefits of Car Financing
- Short term
- Not stuck with the same car for ages
- Tailor the lease to your personal preferences
- Insurance Included
One of the first areas you are going to begin to lose money is on the overall financing.
When you purchase a used car on a payment plan, you can expect to pay a lot more for the car, this is due to the higher interest rate on the loan. Whereas a new car can be financed with little to no money down and sometimes with zero interest. However, interest rates on a used car can easily soar above 7 percent, which over the course of a typical loan can add thousands to the cost of the car.
You may be wondering why would interest rates be higher on a used car compared to a new one, it doesn’t make sense. Sadly, lenders know that they can charge it and get away with it. Typically, people who are desperate for a car and a used car is their last option will fork over the amount on a longer-term loan. Also one must consider that a used car has a lesser value than a new one with a much shorter loan period. With this, the majority of lenders will charge a higher percentage to make as much money as possible.
Basically, you simply need to know that a used car is going to cost you much more if you plan to finance it as opposed to taking out a loan for a new car. In fact, the interest rate alone on a used car is going to be much higher than that of a new car. When you are looking at cars, do not simply focus on the price of a specific car. Consider all of the costs that are associated with it, including the interest per month.
In addition to a much higher interest charge, you need to consider that the overall payments are typically going to be higher. This is simply due to the fact that a used car loan is going to be much shorter, typically averaging less than three years. A new car may cost around $350 per month for five years as opposed to paying $600 a month for three years for a used car.
Is Car Finance Worth It Conclusion?
As you can see, it is important to consider if financing a car is going to be worth it for you, especially if you are planning on purchasing a used car. Take the time to look at all of the costs involved before you even think of signing on the dotted line.