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Advantages and Disadvantages of Car Financing

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Advantages

Drive a vehicle you could not afford right away. If you belong to the majority of the population, you probably cannot afford to buy a car straightaway. Even if you have enough savings, breaking the bank can have negative aftermaths on your future finances, and leaves you unprepared for financial emergencies. Through financing, you can keep your savings intact and instead cover for the cost of the vehicle in monthly installments that you can afford.

Change cars every so often. One popular financing option is to lease the car, which means you don’t own it outright. Although this can give you some limitations, it could also give you more flexibility, such as the freedom to switch cars in as little as one to two years. This can be particularly beneficial if your job requires traveling with clients most of the time. Not only a new car is always attractive, but this can help boost your credibility as a professional.

Customize the term for lower payments. It’s a general rule that the longer your term is, the more you will pay into the loan overall, so most experts would caution buyers away from lengthening the contract’s term. Still, there are cases when this little extra cost can be overlooked in return of having lower payments that could free up needed cash each month.

Option to return the vehicle and walk away. There are financing options wherein you don’t have to do anything after your contract expires. While some give you the option to pay for the remaining depreciation cost and own the vehicle afterwards, you can simply just return it without paying for anything so you can start over with a new lease or buy a different car.

Disadvantages

You would pay more in total. This is the most obvious disadvantage of taking a car under financing. However, if you factor in the convenience and the benefits it can bring to your savings, you’ll find that it’s a little sacrifice worth making.

Sometimes you cannot keep the vehicle. Depending on your financing terms, you might not have the option to buy the car after your contract ends. Make sure you think twice and be futuristic before finalizing with any deal.

You might have mileage limits. Some forms of financing or leasing limits your usage to a certain number of mileage. Depending on how you intend to use your car, this can save you some costs because they typically offer lower monthly payments. However, you have to be careful about exceeding your limit because there’s often a high price to pay.

You cannot customize the vehicle without permission. One thing you would lack with financing is the freedom to do whatever you want with the car. Not only can you not sell it, but you won’t be allowed to modify any parts, features, or design without the dealer’s permission.

You need to sustain the repayments. When you’re under financing, it won’t be that easy to get out of the contract if you suddenly fall short on cash. Unlike if you bought the car or took it under regular loan, you cannot simply sell the vehicle if you found yourself needing to raise extra cash.

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