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Is It Better to Finance a Car or Buy It Outright?

Is It Better to Finance a Car or Buy It Outright?

Finance a Car or Buy It Outright

This is a question that is commonly asked amongst used car buyers and, it's a pretty important one to take the time to deeply consider. Nexcar Auto Sales & Leasing is a used car dealership in Toronto and our team has decided to put this post together to inform and educate customers on both payment options and how to find the right payment option for them. Although buying a car outright might be initially appealing to some, it's important to consider all the reasons why to finance a car.

Financing vs. Cash

The main distinction between these two payment styles is regarding the amount of interest one will be paying overall for a vehicle. When deciding to purchase a vehicle outright, you are able to avoid all interest charges. When choosing to finance, interest charges are collected for each monthly payment.

Build Your Credit

Although it can seem that having the cash upfront is the better option, it's important to note the benefits of financing. If you have no credit or poor credit, you can actually improve your score by choosing the financing route. This is because banks can see that you are making your monthly payments on time, addressing you as a more reliable candidate with an improved credit score.

Downsides of Using Cash

Using cash to purchase a vehicle can help to avoid undesired interest charges, but that's about all the good it does. Paying upfront entitles you to a strict car budget. Essentially, whatever the amount you have on hand is all you have to purchase a vehicle. This puts a strict limit on what you can look at which, isn't always very fun.

Interest Rates

Interest rates are tricky and there are a lot of factors that can influence how high or low the rate for you will be. The choice on whether to finance or pay upfront differs between each person as it depends on their current financial situation.

Factors that influence interest rates include paying a bigger down payment at the beginning. If you do this, it will allow the interest rates to become lower. On another note, if you have a better credit score, your interest rate will most likely be lower.

How We Can Help

Are you looking for help regarding which payment option you should select that's right for you? Nexcar Auto Sales & Leasing is here to assist. Our team would be honoured to explain how an auto loan works and how it can benefit your situation. Give us a call today at (877) 245-9997 to set up an appointment with one of our financial experts if you are interested in learning more about our auto financing options.

Categories: Car Financing Tips

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