Buying a car isn’t a purchase most people take lightly. A vehicle is expensive, and it can affect your finances over many years. You may not realize the number of options you have when it comes to buying a vehicle. Rather than simply taking out a loan, buying a car, and making a car payment every month, there are other ways to get a car into your driveway.
You don’t have to take out a loan in order to buy a car. Many people save up enough money to buy a car outright. This is definitely easier said than done, but if you’re buying a used car this is a possibility. When you’re buying a car outright, you don’t have to worry about financing, interest rates, getting a loan from a bank, or any other potential fluctuating and complicated financial information.
Think of it as taking a loan, but backwards. When you take out a loan, you’ll be setting aside a specific amount of money that will be put toward your car payment. Instead, before you buy your car, set aside that amount of money. Over time (and without the need to pay interest), you’ll build up a solid amount that will let you buy yourself a car.
It isn’t always that easy to set aside that money, though, and sometimes you need a vehicle immediately. For that, there’s the monthly payment option. Most banks will offer you a loan based on your credit rating. In fact, many dealerships will run your information by many banks, and those banks will then compete to give you the best interest rate, thereby giving you the best deal in the long run.
This will mean that you will make a monthly payment to the bank that gave you your loan. There will be a minimum payment, but you certainly have the option of (and most financial planners recommend) paying more than the minimum amount to pay down your loan sooner. Taking a loan and making a monthly payment can help you get a car immediately.
Many people don’t consider the idea of leasing a vehicle. When you’re leasing, you’re essentially borrowing the car from the manufacturer for a monthly price. This means that you still make a monthly payment, but you’ll never actually own the car. That seems like a downside, but if you prefer to drive a new car every few years, then it’s right up your alley. It also means you don’t have to have a down payment in order to drive off the lot with the car. Some dealerships will host lease specials, and some may even throw in other deals like oil changes and tire rotations included in the monthly fee.
Leasing gets tricky, though, and you want to pay special attention to the lease agreement. Because you don’t technically own the car, there may be some restrictions on how you can use it. However, as the lessee, you are able to choose among several plans, so you should estimate how many miles you drive in a year, as this will affect the type of agreement you choose. Remember, if you go over the agreement’s specified mileage, you will have to pay a fee. It’s also important to be aware of any additional fees that may be tacked on. Take your time reading the lease agreement and make sure it works for you. If it doesn’t, take your other options.