Buying a car is one of the most memorable moments for an average Joe, especially for the first time. The thoughts of driving it across town, going on a romantic drive 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 upfront. And before you leave this article, spare a few minutes to read this article till the end. The reasons listed are certainly worth your time!
You Get Tax Rebates
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 get to enjoy using your new car sooner, but you also get some money back at tax time.
Here is how to ensure you get the rebate:
- Be sure you are the primary borrower on loan and not a co-signer
- It would help if you itemized deductions on your tax return to claim the interest paid
- Your loan must meet the “qualified vehicle” criteria.
You Can Invest Your Cash
If you have cash on hand, it might be better to invest that money and let it grow. When it comes time to pay off your loan, you can use the money you’ve earned from your investment to make the payments. This way, you’ll end up ahead financially.
Some best investment ways include:
- Index funds
- Mutual funds
- Peer-to-peer lending
- 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 outright, your credit score isn’t a factor. So, if you don’t have perfect credit, you might end up paying more for your car than you would if you finance it.
Your Lifestyle Won’t Be Affected
Paying for a car outright with cash means you can’t use that money for anything else. So, if you have an emergency, you might have to put off buying the car or dip into your savings. This could put a real strain on your lifestyle. You don’t have to worry about this when you get an auto loan because you can still use your cash for other things.
You Can Get a Lower Interest Rate
If you have good credit, you might be able to get a lower interest rate when you finance your car. This means you’ll end up paying less for your car overall. Although this may still be more money than paying upfront, at least it won’t strain your budget, as discussed 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 helpful if you want to keep your monthly payments low. Keep in mind, though, that the longer the loan term, the more interest you’ll pay over the life of the loan.
You Can Build Your Credit Score
If you don’t have a strong credit history or you’re trying to improve your credit score, getting auto 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 major purchase, like buying a house.
With so many reasons to choose to finance, it might be an ideal option. While it’s up to you to decide whether to finance or pay cash for your car, we hope this article has helped you see the benefits of getting an auto loan.