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According to experts, around 17 million cars were sold in the US in 2019.
You might be thinking about buying a car, but you may not know if you should use cash or finance to pay for your car. You may find it difficult to come to a conclusion as you might get conflicting advice from close friends and family.
Read on, and you'll learn about the benefits and downsides associated with each option. If you want to make a sound financial decision, these tips will help you determine whether you should pay cash or finance a car.
Should You Pay Cash?
Depending on your circumstances, paying in cash for a car can often be a great option.
One of the good things about paying in cash is you don't have to deal with interest payments. After all, you're not taking out a loan, and thus the car doesn't end up costing you more than it's actually worth.
Another good thing about paying in cash is you might be able to negotiate the price. This is because the seller will get all the money in one go, and so they may be willing to adjust their price so they can lock in the sale.
In any case, one of the downsides of paying in cash is you have to use up your savings. This can put you in a tricky situation if you have emergency expenses in the near future.
Should You Finance?
Now let's take a look at the second option of using finance to buy a car.
One of the great things about financing a car is that you may be able to choose from a wider range of cars.
That's because if you're paying for a car in cash, you're going to be limited by your budget. So, if you have $5000 saved for a car, you'll only be able to buy cars that fit in this price range.
However, with car financing, the amount you can borrow is typically determined by your credit score and income.
This can then allow you to borrow more than you have in your savings account, thereby allowing you to choose from a wider range of cars. If you'd like to work out how much you might be able to borrow, a calculator site can help you crunch the numbers.
Of course, the bad thing about financing a car is that you have to deal with interest payments. Plus, if you happen to miss a payment, your credit score may be negatively affected.
Pay Cash or Finance a Car?
It should now be easier for you to decide if you should pay cash or finance a car.
Buying a car is a big financial decision, and it's not something you want to rush into. Thus, if you feel as though you need to do some more reading on this topic, you should probably do so.
Understanding the financial implications associated with each option can be overwhelming. However, if you want to avoid a bad financial decision, there is no other option but to dig in and learn the upsides and downsides of each approach.
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