Is it better to pay cash or finance a vehicle?
Should I pay cash or finance a vehicle?
Like most good questions, the answer depends on your unique situation.
The right move for one person might be the wrong move for another.
That being said we’ll tackle the question head on and outline some of the most important factors to consider.
Will paying cash get me a better price?
In most cases, no. In fact the opposite is often true, especially on new vehicles. Some dealers include “finance rebates” as part of the price they post online.
This means if you don’t finance you actually pay more than the posted price for the same vehicle.
While you’re doing your research make sure and ask what the cash price is versus the price if you finance.
Then decided if the extra rebate is enough to consider financing instead of paying straight cash.
Looking to build your credit? Financing could help
Does the bank you’re considering financing with report to the credit bureaus?
If not, making your monthly payments on time will have little to no impact on your credit rating.
And if you’re not building your rating you’ll miss a valuable opportunity to get a better rate and financing terms on your next big purchase.
How to get banks fighting over your business.
Making monthly payments on time month after month can help build credit for car buyers who finance.
Check with your dealer see which bank offers the best rates and financing terms available.
Many new and used car dealerships have in-house finance departments that work with multiple banks to find the best fit for your situation.
What are the current interest rates?
Is the interest rate of your auto loan higher or lower than outstanding debt?
Or will you need the cash available for unexpected expenses in the near future?
Some buyers might decide they’d rather keep the cash to pay down other higher interest debts.
For others financing might be the best move as it frees up cash for living expenses, unexpected home or auto repairs, or even investing opportunities.
When paying cash could be best option
If you have the cash available and won’t need it anytime soon, than paying cash might be your best option.
But before you jump in and write the check look at your total finances, is there another route where that cash would be better used?
Some buyers choose to finance their vehicle at an affordable monthly payment and use the excess cash to pay down credit card debt or other personal expenses.
Once you make the decision to pay cash it’s gone, so if you’re working on a monthly budget make sure you can do without the cash.
Would you rather pay all at once or spread the cost out over multiple years?
It might sound simple, but sometimes it just comes down to what you prefer.
Some people want to have a fixed monthly payment they know is coming and spread the cost out over multiple years.
If this is you, then financing will likely be your best option.
If you’d rather not have a monthly payment and you can part with the cash up front, then paying cash will be the best option.
Whatever you decide is best for you, we’re here to help.
Every month we help hundreds of car shoppers find the right car at the right price with the best financing available.