Buying a car is one of the most memorable moments for an average Joe, especially for the first time. The thought of driving it across town, taking a romantic stroll with your partner, or the luxury of never having to wait for a bus can give you goosebumps. And if you have cash up front, you might be tempted to pay in full and own the car from day one.
But hold your horses! Getting an auto loan may be a better option than paying up front. And before leaving this article, take a few minutes to read this article till the end. The reasons listed are definitely worth your time!
You get tax refunds
When you take out a loan to buy a car, the interest you pay on that loan is tax deductible. So not only do you enjoy your new car sooner, but you also get some money back at tax time.
Here’s how to make sure you get the refund:
- Make sure you are the primary borrower on loan and not a co-signer
- It would be helpful if you itemized the deductions on your tax return to claim the interest paid
- Your loan must meet the “eligible vehicle” criteria.
You can invest your money
If you have cash on hand, it might be best to invest that money and let it grow. When it’s time to pay off your loan, you can use the money you’ve earned from your investment to make the payments. This way, you will find yourself ahead financially.
Here are some of the best ways to invest:
- Index funds
- Mutual fund
- Loan between individuals
- real estate crowdfunding
You don’t need a perfect credit score
When you get an auto loan, the interest rate will be based on your credit score. But, if you have cash on hand to pay for the car, your credit score is not a factor. So if you don’t have perfect credit, you could end up paying more for your car than if you financed it.
Your lifestyle will not be affected
Paying cash for a car means you can’t use that money for anything else. So if you have an emergency, you may need to postpone buying the car or dip into your savings. It could put a strain on your lifestyle. You don’t have to worry about that when you get an auto loan because you can still use your money for other things.
You can get a lower interest rate
If you have good credit, you may be able to get a lower interest rate when financing your car. This means you’ll end up paying less for your car overall. While this may still be more money than paying upfront, at least it won’t strain your budget as noted above. And, if you can get a 0% interest rate, even better!
You can get a longer loan term
When you finance your car, you can choose the loan term that best suits your needs. This flexibility can be useful if you want to keep your monthly payments low. Keep in mind, however, that the longer the loan term, the more interest you will pay over the term of the loan.
You can build your credit score
If you don’t have a strong credit history or are trying to improve your credit score, get car loans can help. When you make your payments on time and in full, it can boost your credit score. This can come in handy later if you need to take out a loan for a big purchase, like buying a house.
With so many reasons to choose finance, this could be an ideal option. While the decision to finance or cash out your car is up to you, we hope this article has helped you see the benefits of getting a car loan.