Paying for a Car in Cash: The Pros and Cons
When it comes to paying for a car purchase, you have two main choices: buy the car in cash, or finance it through an auto loan. Though you’ll often hear people say that cash is always the best way to go, things aren’t necessarily that cut-and-dry. Check out these pros and cons of paying cash to see if this method works for you.
It saves moneyBuying a car in one transaction often proves less expensive, because you won't have to pay interests and fees that tend to accumulate over the length of the loan period. You'll also have no monthly payments to worry about, which can give you peace of mind.
The car is immediately yoursWhen you finance your vehicle, the title won't be handed to you until you are fully paid. Until then, the car is owned by the bank, dealership, or entity financing the car. If you fail to make payments, you risk having your car repossessed, and all the payments you've made in the past goes down the drain. None of these problems should worry you when you pay for the car in full.
It offers greater flexibilityWith the car now in your name, you are free to sell or trade it in should you decide it's not for you or need some instant cash down the line. Since you own the car, you have an added financial asset that you can use any time you want.
Saving takes timeUnless you have the cash lying around, you'll need to save up for the car, which can take a while. Also, life can take a sudden turn for the worst when you least expect it--just watch the Disney/Pixar film "Up" for proof. And when the unexpected happens, you may have to dig into your savings, which could mean restarting your saving efforts from square one.
You may not have anything leftYou're done saving for the car, and are now ready to make your purchase. But that's not the only money you have, right? If you’re spending all the cash you have on hand, you won't have any money left for emergencies. Told you--you should have watched "Up" first.
Your choices might be limitedOne of the perks of financing is that you can still manage to own a car that's well above your pay grade if you play it smart. If you're paying in cash, some nicer cars may be out of reach, and you'll have to settle for cheaper options.
So what do you think? Does paying cash for your car work best for your current financial standing? If you're not sure, don't be afraid to consult a financial advisor before you proceed with your plans.