People that are saving money to purchase a car are usually faced with the question of whether they should purchase a car outright with the money that they have saved or if they should use that money as a down payment for a car loan for a more expensive car. While there are obvious benefits to both sides of the argument, for many people, the benefits of choosing the car loan outweigh the benefits of just paying for the car outright. Here are several reasons why you should consider choosing a car loan and purchasing a more expensive car.
A Car Loan Can Save You Money
People that are considering a car loan should know that obtaining a car loan and choosing a more expensive car could save them money in the long run. If you spend $2,000 on a vehicle like the Ford EF Falcon, you may own the car outright, but you will probably not have a warranty on the car and will have to pay for any repairs needed out of your own pocket. You may also have to purchase another car within a few years to replace it when it has finally broken down completely. On the other hand, using that $2,000 as a down payment on a $10,000 car like the Toyota Camry ACV40R Altise will allow you to get a newer vehicle that will cause you less headaches and may come with a warranty that will repair any issues that arise in the near future.
A Car Loan Can Build Your Credit
Obtaining a car loan can help you build your credit in ways that purchasing a car outright can’t. The payments for the car loan are reported to the credit monitoring bureaus and added to your credit history, increasing your credit score and credit worthiness in the eyes of other lenders. Lenders such as IMB offer new car loans to a wide range of borrowers with various credit scores and credit histories so that they can rebuild and increase their credit scores. Your current credit score will determine the interest rate that you are charged for the car loan you are using to purchase your new car.
There are other benefits to choosing a car loan as well, including spreading out the payments for the car over several years. By choosing a car loan, you put yourself in a better financial position with a vehicle that is more reliable and mechanically sound. Many lenders are willing to pre-qualify borrowers for car loans so that the borrower will know the loan amount they qualify for before they begin shopping for the car.