Pros and Cons of owning a Car with Car/Auto Loan
Most of us would love to own our very own car. But not all of us have the luxury of having enough cash to pay up front to become a car owner. As our incomes start to crawl up, our dreams of owning a car becomes within our reach, with the help of car loans of course. Getting a car loan can be easy (as long as you have a good credit standing) and convenient (with flexible terms and low interest rates), but they are also a huge responsibility.
Here are some of the advantages and disadvantages of buying a car with a car loan that you must consider:
Pros
1. The most obvious advantage of getting a car with a car loan is the fact that you will be able to use your own car immediately, without saving up for years to finally own one. If you own a business and having a vehicle at your disposal, it could mean a huge difference. Getting a car loan, and paying an interest will definitely be worth it on the long run.
2. You are building equity.
3. You can sell or trade your car when your loan term is over.
4. You are free to modify your vehicle if you take a car loan, unlike some other types of financing.
Cons
1. Until you have paid the whole amount, it will be like you are renting the car. Only after which the ownership will be transferred to you. In case you cannot pay the monthly repayments, there is a risk of your car being repossessed by the bank. Also, you must realize that if you sum up all the interest that you pay, it will be equal to a large proportion of the car’s actual price, which means that finally you will be paying a lot more for a car than a person who bought the same car by paying upfront.
2. Don’t assume that all loans come with nearly the same credentials. You must compare interest rates, loan period and margin and make a decision based on your current financial situation. The internet will be your greatest friend at this stage of making your decision. Not only will you be able to get access to varied information regarding the best loan for you, but you will be able to source the perfect lender for you.
3. Your car will start to depreciate in value the moment you drive it off the lot which means that by the time you finish repaying your entire loan, it will be worth a lot less.
4. After you finish your period of repayment, you will be faced with the high maintenance cost as your car will be quiet old now and requires expensive maintenance.
5. When you are buying a new car the corresponding insurance premium will be high. Many of us do not consider this, and look into only the interest rate eating into our monthly salary. Chances are that your financing company will expect you to carry a high damage coverage so that their interests are protected. You may also need to purchase gap insurance to make up any difference in case of total loss.
Here are some of the advantages and disadvantages of buying a car with a car loan that you must consider:
Pros
1. The most obvious advantage of getting a car with a car loan is the fact that you will be able to use your own car immediately, without saving up for years to finally own one. If you own a business and having a vehicle at your disposal, it could mean a huge difference. Getting a car loan, and paying an interest will definitely be worth it on the long run.
2. You are building equity.
3. You can sell or trade your car when your loan term is over.
4. You are free to modify your vehicle if you take a car loan, unlike some other types of financing.
Cons
1. Until you have paid the whole amount, it will be like you are renting the car. Only after which the ownership will be transferred to you. In case you cannot pay the monthly repayments, there is a risk of your car being repossessed by the bank. Also, you must realize that if you sum up all the interest that you pay, it will be equal to a large proportion of the car’s actual price, which means that finally you will be paying a lot more for a car than a person who bought the same car by paying upfront.
2. Don’t assume that all loans come with nearly the same credentials. You must compare interest rates, loan period and margin and make a decision based on your current financial situation. The internet will be your greatest friend at this stage of making your decision. Not only will you be able to get access to varied information regarding the best loan for you, but you will be able to source the perfect lender for you.
3. Your car will start to depreciate in value the moment you drive it off the lot which means that by the time you finish repaying your entire loan, it will be worth a lot less.
4. After you finish your period of repayment, you will be faced with the high maintenance cost as your car will be quiet old now and requires expensive maintenance.
5. When you are buying a new car the corresponding insurance premium will be high. Many of us do not consider this, and look into only the interest rate eating into our monthly salary. Chances are that your financing company will expect you to carry a high damage coverage so that their interests are protected. You may also need to purchase gap insurance to make up any difference in case of total loss.
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