If you’re shopping for a car, you’ll have a few different options. You might be faced with the option to use the cash you have saved up as a down payment for a pricier car, or to settle for a less expensive car, but without the car loan. Some advantages of purchasing a car in cash include:
More car insurance options
All drivers should have car insurance, but if you’re financing your vehicle, you’ll likely have to purchase more coverage beyond the basic policy. After all, because it’s technically the bank’s car until you pay it off, your lender will want to ensure that their asset is protected in the event of an accident. If you’re buying a used car in cash that would cost a lot to insure with extra coverage, you’ll always have the option to opt for the bare minimum (such as liability only) from the beginning if you’re not financing your purchase.
You’ll have an asset
Once you pay off your car, you’ll have an asset—but it can take a few years for this happen. Buying your car in cash immediately gives you an asset, which can be helpful if your credit isn’t the best and you’re trying to apply for something that requires good credit. For example, if you’re applying for a home loan, lenders like to see that you have assets that could potentially be used as collateral, and it will boost your chances at getting approved.
You won’t be in over your head
Financing a car usually means you’ll be taking on a huge debt for the next few years. Initially, the monthly payments might seem affordable, but many borrowers take on way more than they can handle. Scraping together every available penny to make those payment deadlines is less than ideal, and eventually can grow tiring, especially once the novelty of the new car purchase wears off. Just like when it comes to credit card purchases, avoiding a car loan can also mean avoiding a purchase that you really can’t afford.
If it’s time to sell
Selling a car can be tricky when you finance it, because after all, a car is a depreciating asset and it loses its value the moment you drive it off the lot. If your car is paid off or you just paid for it in cash from the get-go, you won’t have as many issues. But if you’re still making car payments, you could end up upside-down in your car loan if you decide to sell.
Are you receiving annuity payments, but would prefer to receive your money sooner so that you can buy a car? If you’re looking to bypass the car loan and buy your vehicle in cash, Peachtree Financial Solutions may be able to help. Contact Peachtree Financial Solutions today for more information and how you can sell future annuity payments for a lump sum of cash.
Nothing above is meant to provide financial, tax, or legal advice. You should meet with appropriate professionals for such services.