Once you have decided to purchase a vehicle, you have to decide then how are you going to pay for the vehicle.
This seems like a simple discussion however it is not. When you agree to buy a vehicle, the salesperson starts the process and does not want to lose the sale, therefore typically the salesperson is not going to tell you about all your options and how these options may or may not be beneficial to you.
So let's take a look at your options:
- Paying cash - This is simple, write a check or bring in a bag of cash. But, this may not be the best option for you. When paying cash you do have to look at how much is this purchase going to dwindle your saving account. It may be a better option to consider a one-time lease payment or possibly low interest financing.
One-Time Lease Payment - If you are someone who likes to trade in your vehicle every 2 to 4 years, this is something to consider. Instead of writing a check for say "$40,000" you could possibly drive the new vehicle for the next 3 years and only write a check for say "$20,000", allowing you to keep "$20,000" in your savings.
Low Interest Financing - When rates are low and the economy is questionable it might make more sense to take a low interest rate loan and keep your money in savings. Also, there are times when the financing arms of an automobile manufacture offers extra incentives (rebates) to finance with them and if you pay cash you would not be eligible for these incentives.
Rebates vs. Special Interest - 0% sounds great when financing a vehicle, but it is not always your best deal. When you take 0% financing you typically lose all the consumer rebates. Let's look at a comparison:
This type of example is not always the case, but it does happen more often then you think. By taking scenario 2, not only would your payment be lower, but your pay-off balance would be lower, putting you in a better situation if you decided to trade earlier than normal. So, before you sign up for a special interest rate, please review all of your options.
- Your Credit Union - Yes Credit Unions offer great rates however did you know that a lot of dealers are already signed up with your credit union. What this means is they can process your credit union loan for you without you having to leave the dealership and going to the credit union to structure the loan and pick up a check. This can save you the time and the hassle of all this back and forth. Also note, if you are interested in electing for the dealership's finance products a credit union or bank may try and talk you out of them just to offer you there's. Please review the benefits you receive from all your product options before making a decision.
- Leasing - Oh, the dreaded word. Leasing is a very smart way to drive a vehicle for a set time period with out having to worry. Here are some typical advantages to leasing:
Always under factory warranty
Guaranteed value at the end (no negative equity)
Lower payments (in a lot of cases)
Always driving a newer car
Leasing is not for everyone, however it can be a good solution for you to drive the new vehicle you want.