If you're lucky enough to be able to afford a car outright, you may still want to consider auto financing when buying a car through a dealership. Why would this be something that can benefit you? Use this guide to find out if financing your new vehicle is best or if you should just pay cash for the vehicle.
How's your credit?
If you have a low credit score but cash in hand, it might seem like a great idea to avoid getting a loan to finance your automobile to keep your credit score from dipping lower. However, the opposite may be true: in putting some money down on your automobile, you can make auto financing affordable for you even if your interest rate isn't too competitive due to your credit score. Auto financing can actually help you build your credit score with time and the money you would have spent outright for your car you can use for monthly payments instead.
How much car do you want?
You may have cash to buy a new car, but how much car can you actually buy with the money you have? If you have money for a decent new car but you want something upgraded or with custom features and you don't have enough cash, auto financing can be great for you. Put most of your money into a down payment to make your car financing experience more affordable to you and you can buy whatever vehicle you want within your budget after that.
How much money do you need?
If you pay cash for your car, remember that you'll need to have some funds set aside for paying for car insurance and registering and licensing your vehicle. You also want to have funds set aside for future vehicle expenses. Paying cash for your new car can be a great idea, but not if it takes all your money and doesn't leave you with much to work with regarding future vehicle use.
Pay for most of your vehicle upfront, leaving some money aside to allow you to get your vehicle road-ready after you buy it. This way, you can get auto financing for just a small amount, and you'll still be able to stay on top of your vehicle ownership needs.
Your auto dealer will want to see your credit, work history, and other documentation to help you come up with the best auto financing plan should you go this route. Sometimes it's in your best interest to do auto financing, even if you have the cash outright to pay for your vehicle.