Cash or Financing Your Purchase

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"Cash is King" my grandfather always said. If you have the resources to pay cash for your car that certainly is one way to fund your purchase. Those with exceptional credit, however, have the ability to borrow at lower rates and less money down.  This allows you to keep your money at finger-tip reach while enjoying minimal interest during your term or whenever you decide to part with your vehicle. Remember loans today are simple interest which means there is no penalty for an early pay-off of your loan.

Though paying cash seems to be the most sound method of purchase let us think about a few things worth considering. There is nothing wrong with financing a purchase when the item financed will maintain purpose (use) and  value. Let us also consider the "credit building aspect" of a car loan. Yes a first time car buyer will likely not get the most favorable interest rate, but you have to start somewhere. There will be more car loans in the future as well as purchasing a home  which will likely involve a mortgage. A car loan might be a great step furthering your credit worthiness as long as your payments are made in a timely manner.

If you choose to finance at the dealership what are the benefits? There is a huge convenience factor right out of the gate! So you certainly may go to your credit union or bank you just do not know what curve balls may arise. Maybe there is a new vehicle opportunity that may  present itself  at a higher price or there might be some products that may make sense that may be presented during the "purchasing / finance process". There are opportunities to purchase additional warranties or perhaps GAP insurance. A great explanation of gap insurance is available https://www.bankrate.com/insurance/car/gap-insurance-florida/ Also ask questions all along the process so you may make a wise purchase.

We have all heard of "your credit score". Credit score represents your ability  to  successfully repay a loan making payments "on-time". It is a measure of how well you have kept up with your commitments to timely pay installment loans (equal payment loans for a specific length of time) or revolving credit (credit cards and other retail charge accounts). It is said "history repeats itself" and lenders determine your credit worthiness based on past performance. The higher your credit score results in the ability to make a lower down payment and realize a lower interest rate.

What is a good credit score?  Maybe 720 and up will put you in a pretty good position for an automotive loan, but do not distress if your score is lower. Yes you may have a higher rate auto loan, but go for it and make your payments on time for 6 to 12 months and refinance your loan. What if you have a credit score below 600? These loans a bit more challenging, but are certainly doable. The reality of a weaker borrower is having to make a larger down payment and realizing a higher interest rate. Additionally older and high millage vehicles become more difficult to finance for those with slower credit history.

Credit, good or poor, starts somewhere. Good credit opens doors and opportunities. Often a good way to establish credit might start with a credit card. Obtain the credit card, make purchases on the credit card, and make payments on the credit card prior to the due date. Keep making on time payments and you will have offers  for additional credit opportunities. It is also possible to purchase a vehicle with no credit history. In order to accomplish you will need to demonstrate stable employment and be prepared to make a large down payment. Example might be a $4000 down payment for an $11,000 vehicle in order to get a more favorable interest rate.