Deciding to purchase a car is a major life decision because it involves a considerable amount of money. Your car is a big personal asset and therefore must be decided carefully. Nowadays, there are a lot of available options that you can choose from when it comes to paying for a car.
The auto-finance market has steadily increased over the years and more people are taking advantage of this method since this is the fastest way in order to get behind the wheel.However, some people opt to pay cash when buying a vehicle.
Having cash on hand and using it to pay for your car might not be the best way for everyone. Why? Most individuals have other financial obligations that needs to be paid off and therefore pouring all your savings into a single asset may cause financial issues. But it still depends on your situation and if you are having second thoughts whether you should pay using cash or not, this article can help you with that dilemma.
Your Credit Score
Incurring debt is not purely a bad thing. If you are a millionaire then there’s no problem paying a car in cash since you have money to spare but this is not the case for most people. That is why most car buyers are opting to apply for auto financing since this is the best solution to their transportation needs.
Moreover, when you start taking on credit (like an auto loan) and can successfully repay it, your creditworthiness will also increase. Consequently, this will also eventually lead to a higher credit score and lending institutions like to work with a client that has a good credit score.
To add, although you won’t take on debt if you decide to pay cash for a car, you won’t be able to establish credit as well. Having no credit is risky because if you need to borrow money from a lending institution for personal or emergency purpose, your lender will hesitate to give you instant approval because you have not proven your creditworthiness.
Therefore establishing credit whether through a house loan or auto loan as early as possible is crucial. You will never know when the need of financing arises so start building your credit today.
Other Ways You can Utilize Your Savings
A mentioned earlier, most people have other credit obligations such as mortgage and credit cards. By opting to apply for an auto loan, you can pay off other outstanding debts while still being able to own a new car. This is one of the biggest advantage if you choose auto financing.
If you have the ability to pay a car fully using cash, you can use this cash as down payment to go for a better car instead. Having cash on hand gives you this option. So pamper yourself a little bit by choosing to buy a better car. Visit this website to learn more about auto loans.