A vehicle is an essential asset. Whether it’s for business use, exploring the open road on a road trip of a lifetime or getting away for the weekend.
When you are looking to buy a car, there are a few options available for you if you don’t have the available funding to buy the car outright. We’ve added some advantages and disadvantages of buying a vehicle for cash or use auto finance in Tweed Heads.
Cash Advantages
- There is no interest rate. You pay the amount that was asked for the vehicle only.
- You have full ownership of the car.
- You free up your borrowing power with banks should you need to borrow for another purchase or access a personal loan. You can use the vehicle as security against the loan as it is unencumbered.
Cash Disadvantages
- Vehicles are expensive. Saving could take a while.
- You could use up your cash reserves, meaning should an emergency arise you may find yourself short and then will need to apply for a loan anyway.
- Cars depreciate in value, quickly. Spending a large sum of cash on a vehicle may not benefit you when the funds could be directed elsewhere, such as lowering your home loan balance, which may save you unnecessary interest payments.
Auto Finance Advantages
- Interest rates are low. This means your loan repayments can be manageable and the total interest payable over the loan may be lower than you think1
- You have more choice in vehicles. Using auto finance can allow you to budget correctly for monthly repayments, which may allow you to borrow at a higher loan limit allowing you to fund a more expensive and newer vehicle.
- You will be able to access your vehicle straight away with most loan settlements occurring the same week. You could apply for an auto loan on Monday and be driving away from the dealership on Friday.
- Financing can help with your credit rating as you are establishing a solid repayment history with the bank. This can help you down the track if you need to borrow again.
Auto Finance Drawbacks
- As the bank is lending you the money, they will charge an interest rate, so your total loan amount will be higher than the cost of the vehicle.
- You will be contracted to the bank to repay the loan over a set period of months.
These are only a few advantages and disadvantages of paying cash or financing. To find out more on whether auto finance will fit your needs in Tweed Heads; Get in touch with the auto financing professionals at iCREDIT. We’ll help you find the perfect auto financing for your specific situation, obligation free.