Even though times are tough as a result of the COVID-19 pandemic, you could still find yourself in need of a new car. For example, if your old vehicle is broken down and beyond repair, you may find yourself in the market in the near future.
This leads to an important question: what’s the best way to pay for a new car?
While there is no right or wrong answer, as it’s based largely on your financial circumstances, there are several ideas to consider.
1. Pay with Cash
There are both pros and cons of doing so, especially during times of financial uncertainty.
If you’re in position to pay with cash, the primary benefit is that you’re not taking on more debt. As a result, you don’t have to worry about another monthly payment that will alter your budget and potentially bog you down.
Conversely, it’s critical that you don’t use all your cash on a new car, as you won’t have anything remaining for emergencies or other expenses that come about.
Tip: consider buying a late model used car to save money. This may allow you to pay with cash, while avoiding a situation in which you deplete your savings.
2. Finance the Purchase
The majority of consumers finance the purchase of an automobile, as they don’t have enough cash on hand to buy it outright. And even if they do, some people aren’t comfortable with the idea of laying out such a large amount of money for a depreciating asset.
If you’re interested in financing the purchase of a new car, there are two options available to you:
- Find your own loan, such as through your local bank
- Let the dealer’s finance department assist you
It’s best to look into both options, as this allows you to settle on the loan with the best terms and conditions. While there’s a lot to consider, the interest rate you can secure is more important than anything.
Tip: many car companies are offering zero percent financing to help consumers during the COVID-19 pandemic. With this, you never pay a dime in interest over the term of your loan.
3. Make a Down Payment
Even if you’re financing your vehicle, it doesn’t mean you have to finance 100 percent of the purchase price. You can make a down payment to lower the amount that you borrow, which also lowers your monthly payment.
Consider how much money you can comfortably put down, as this will give you a clear idea of the impact on your monthly loan payment.
Some people enjoy buying a new car, while others despise the entire process. Regardless of your feelings, there may come a point when you find yourself in the market.
As you begin your search, take the time to consider how to best pay for your new car. Once you consider all your options, you’re in better position to make a decision that will suit your finances now and in the future.