Cash or Financing - How Should You Purchase Your Next Car?
Written by DriveAxis.ca June 07, 2023
Interested in purchasing a new car, but torn on how to pay for it? Many people like to pay either with cash, or via a financing loan, both of which have their pros and cons. Deciding whether to buy a car with cash or financing depends on several factors, which we’ll touch on today. Whether buying new or certified pre-owned, the same tips apply, and understanding the criteria of both cash and financing payment methods will bring you one step closer towards making a decision.
BUYING WITH CASH
Buying a car with cash does come with a number of attractive upfront benefits, namely the fact that you’ll own the vehicle outright from the beginning. This completely eliminates monthly payments, as well as interest charges, which can increase over time. You’ll also avoid another article of debt in your finances, which is a definite plus if you’re contemplating buying a house, or other financial goal.
Paying with cash may also give you stronger negotiating power when it comes to the purchase price, since you're offering immediate payment. This is an especially good tactic to use if you’re buying a car at key points throughout the year when dealerships are looking to make room for new stock. Both seller and buyer can enjoy a much more streamlined and attractive deal.
Always bear in mind that buying a car via cash does require you to plan ahead when it comes to finances. Avoid choosing this option if you have too much debt attached to your name that you still need to pay down. Similarly, make sure to live within your means, and refrain from leaving yourself too short on cash. Otherwise, you may find yourself incapable of dealing with emergencies or other financial complications that are a part of life.
BUYING WITH FINANCING
On the flip side, choosing to finance your next vehicle is another advantageous way of accomplishing your goal, and it does come with a few side benefits as well. For instance, you can preserve your cash reserves for other important expenses, investments, or the paying down of existing debt. Even if you choose to finance a less-expensive vehicle, you can avoid a large upfront sum that could be put towards other things, like a down payment on a house.
Financing is also more flexible, allowing you to spread the cost of the car over a longer period of time, making it more affordable in the short term. A good rule of thumb is to take a financing loan for as short an amount of time as possible, while still taking into account your financial goals over the next five years. This also has a lot to do with your credit-related goals. If you have limited credit history, or want to improve the health of your existing credit score, you can use a car financing loan to bring it back into the green where it belongs. This will have long-term benefits for your financial future and life goals, especially if you’re planning to start a family.
When choosing to finance, always make sure to evaluate current interest rates, loan terms, and any potential associated fees, as well as your ability to comfortably make monthly payments without compromising your overall financial well-being. It may be helpful to consult with a financial advisor who can assess your specific situation and provide personalized guidance. Otherwise, just be mindful of your financial situation, and whether you can maintain monthly payments in a comfortable manner. If so, you’ll be setting yourself up for success as the years go by.
While some buyers do opt to buy their cars outright with cash, many prefer to finance the reasons listed above. If you’re interested in financing a top-notch pre-owned vehicle, consider visiting us at DriveAxis. Worried about meeting the criteria for a finance loan approval? Don’t be! We handle all financing in-house, which allows us to guarantee approval for everyone who applies, regardless of their credit health or history.
We’ll help you choose a car that will suit your needs, lifestyle and family, while giving you peace of mind the moment you drive off the lot. DriveAxis has helped thousands of customers find their dream car, and we’re ready to assist you in finding yours. Contact us today!