Should you finance or should you save for your new car?
Looking to buy a car? Should you save for it or get finance? The answer depends on your circumstances.
For example, if you don’t have cash but have a good credit history, finance could be the right option for you. Saving, on the other hand, can take time – but if you’re close to your savings target or can wait, it may be a good idea. Let’s take a look at the pros and cons of each, and also how a combination could help you into your new car quicker.
Getting a car loan
The first immediate advantage is that you can get your new set of wheels right now.
With a car loan, repayments can be tailored to fit your budget. Plus, by having a more recent car, you could also be saving money in the long run. Think about fuel efficiency and lower servicing costs - so the net effect may not be much more than waiting and paying cash.
Of course, before signing on the dotted line, don’t forget to consider interest rates. Like any other loan, the longer you take to pay off your car loan, the more you will end up paying in interest. However you choose to structure your car loan, it’s important to budget for the repayments, so you know how much you can afford.
Also, keep in mind that you will not be able to sell your car privately until the loan is repaid. In some cases, you may be able to upgrade or trade it in, if your lender is willing to swap the security.
Like to get started? Please get in touch: we can help you get a pre-approval to go shopping for your new set of wheels. A pre-approval can give you confidence, peace of mind, and more choice to find the right car for you.
Saving and paying cash
Obviously, paying cash means you aren’t paying interest to a lender and therefore overall your car will cost you less. This alone is a big plus, as it frees up disposable income for your everyday expenses - so you can save more on a day-to-day basis and perhaps use that money in other places.
However, keep in mind that it could take a really long time to save for your car. And in the meantime, you could be paying extra costs to keep your existing car running smoothly.
Of course, if you are close to having the amount you need, it may be easier to focus on saving that last bit more quickly. If you are buying second-hand, however, you might want to be in a position to buy the car outright – and that’s where a car loan really comes in handy.
Alternatively, you could choose to use a combination of savings and a loan. By doing this, you could have your new car faster than you would if you were saving. In addition, as you are not financing the full amount, you can reduce your overall interest costs.
If you’re ready to buy that new car and want to discuss your financing options, contact our team on 0800 666 022. We’re here to help.
Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure the content is correct, the information provided is subject to continuous change. Please use your discretion and seek independent guidance before making any decisions based on the information provided in this article.