When it comes to buying a vehicle, whether it’s a large 4x4 family car, a sleek urban motor or a commercial business van, more often than not, people's’ number one concern is the cost of the vehicle. Cars are by no means cheap. Due to this, there are a number of plans and payment methods available for you to choose from. But which one is really providing you with the best value?
To help you decide on the best course of action, and to ensure that you have all the facts and figures available at your fingertips, we’ve put together a guide explaining the pros and cons of both cash payments and car finance options, ensuring that you can make an informed and educated decision that perfectly fits in with you.
The Pros of Cash Payments for Cars
Prioritising Needs
Although for many people it’s certainly true that paying cash in hand for your vehicle means that you are unable to afford quite such a fancy or expensive car, this can actually be incredibly beneficial in the long run. By having to be more frugal and cautious in your choices it means that you will have to think about what you truly value in a car, preventing you from spending unnecessary money on ultimately useless features. By having to think things through and prioritise your needs and wants, you can end up saving yourself a tremendous amount of money.
No Interest Charges
Perhaps the greatest benefit of paying for a vehicle with cash in hand is simply not having to pay interest on a loan. Although there are certainly good deals on interest rates out there, there are an equal number of poor deals that can see you vastly out of pocket. Buying cash in hand ensures that you are not paying excess on your vehicle and guarantees that you simply pay the flat out value of the car, potentially saving you hundreds or even thousands in the long run.
Financial Cushioning
Though we rarely like to admit it, there are often times in most of our lives where money can be particularly tight. In moments like these, it can be useful to have a financial plan in place to provide a monetary cushioning. By paying for a car outright in cash, you will not only be subject to fewer monthly payments and total outgoings, but you are also in a position where you would be able to sell your car if the need ever arose (something which would be much harder to do if you were tied down by loans and outstanding payments).
The Cons of Cash Payments for Cars
Fewer Good Deals
When it comes to selling vehicles, car salesmen often stand to make commission on the various types of loans and financing options they can sell to prospective buyers. However, if you opt out of finance or taking out a loan, the salesmen will not be making as much money off the sale of the motor, and therefore may be less inclined to give you a good deal on your car. Nationwide Cars, on the other hand, are specialists in new car sales, and would prefer you to pay in cash, rather than take out finance.
Emergency Money Used Up
Unless you’re lucky, most people will have to save a lot in order to be able to afford to buy a vehicle outright in cash. This means that those who do often put away these savings into a ‘car fund’. However by investing all your money into a car, you are limiting and reducing your financial cushioning. There may come a time when you need money and have to dip into your savings, but having placed all your savings into buying a car, you will have significantly less money available to provide you with a solid financial safety net.
Smaller Selection of Cars
Due to the significant cost of cars, paying for a vehicle outright in cash can be difficult to say the least. Not only do you have to save up a substantial amount of money, but you also have to think very carefully about your budget and what you can get for your money. Though budgeting is certainly still an important factor with car financing, thanks to various deals available to choose from, you can often walk away with exactly the car you wished for. However, by paying for a car upfront, you are often subject to a smaller selection of cars, and thanks to a smaller leeway on budgeting, will be unable to personalise your car in the way you may wish. While this is true on the whole, our discounts on new cars are particularly high. This makes it more affordable for our customers to buy a better specification. In fact, we often find people go for a trim level above what they were originally looking for due to the initial saving they’re making.
The Pros of Car Finance
Flexibility at End of Payment Period
Unlike with many motoring loan options, when it comes to financing a car, there are a significant number of options available to you upon reaching the end of the the payment period. Depending on which financing option you choose, on ending your contract, you will then be faced with a number of choices, where you can either sell, trade, buy, or simply give back your car. Financing can provide you with great flexibility, and allows you the freedom to choose what to do with your car at the end, making it an entirely personal experience.
Financial Credit Flexibility
Unlike with other forms of monetary payments and loans, many financing options are incredibly flexible and rarely penalise people for their credit scores. This means that nearly everyone is eligible for can finance, which can greatly reduce the pressure and stress of buying a car.
A Better Car
By spreading out payments and breaking down costs into manageable amounts, car financing allows you the luxury of buying a car that you may otherwise be unable to afford. Thanks to its monetary flexibility, with financing you are able to craft and select a plan that fits in with your lifestyle, meaning that not only are you able to buy brand new motors, but you can even splurge on those little details that truly personalise a car. With car financing, those heated seats and convertible roof may not be such a distant dream after all.
A Simple Process
When it comes to borrowing, lending and loaning out money, often the greatest concern people have is as to how long they will have to be making repayments for. However with car financing there is a set period of time for which you are expected to make payments, and once this is up you are then free of any financial obligations. Not only does this take out a lot of the stress from buying a car, but it also creates a simple and hassle free payment process that is easy to both understand and follow.
The Cons of Car Finance
Insurance Costs
Many people take advantage of car financing in order to fund a new or modified car, and while this can certainly result in excellent value for money, few people take into consideration the insurance implications of car financing. Due to an increased value in your car, you may well find the cost of your insurance rising as premium rates go up due to its increased value, meaning that you may potentially find yourself spending more on your insurance than you previously have.
Buying More Than You Can Afford
When you’re sat in a car showroom looking at that gleaming BMW you’ve always wanted, it can be incredibly easy to get swept up in thoughts of monthly payments and spread out costs. When you’re not paying out a huge lump sum of money all at once, it’s easy to be swayed and tempted into buying a car that your income and budget simply does not cater for. It’s important to plan and be aware of how much you can afford to spend on a car before delving into car finance or you may find yourself spending well outside of your means.
Is it Better to Buy a Car Outright or Finance it?
As with anything there are certainly a number of pros and cons to be taken into consideration regarding both buying a car upfront and financing it across a period of time.
Whilst buying a car outright provides a certain amount of financial cushioning and covers you from having to pay out any interest charges, it also means that you will find fewer good deals and have a smaller pool of cars to choose from. Similarly with car financing, while you can be assured of optimum flexibility and a hassle free process, you may have to be wary of insurance premiums. Ultimately to ensure that you have a seamless and financially beneficial experience when buying your new car, it’s important to take all of these factors into consideration before deciding which option best suits you and adapts into your lifestyle.
If you’re looking to finance a car, why not reach out to one of our friendly team today and we’ll help you find the perfect financing option for you and your lifestyle.
