There are several ways to go about buying a new car. A full payment of cash is one option, but most people don’t have those kinds of finances available. Purchasing the car after an expired lease could also work, but this method has its own drawbacks associated with it. Here are 3 specific reasons why getting an auto loan is the best method of purchasing a new car.
In the scenario where interest rates have dropped and you’re considering refinancing, most companies are more than happy to loan you enough money to pay off your old loan. This means that you are left with lower monthly payments. In turn, these lower payments mean you can put more money toward future payments, enabling you to pay off your loan sooner with less interest. This opportunity is not available through other payment methods, making an auto loan the better option.
2. Better than Leasing
After having settled on an auto loan, every car payment you make takes you one step closer to officially paying off and owning the car. With leasing however, you can only rent the vehicle for a certain amount of time before its gone. At the end of the lease, you have the option to either return it or buy it, but at the end of th lease, you’re not closer to owning a vehicle.
Auto insurance is another matter. Should you drive a leased vehicle and get in an accident, most dealers priced the repair costs far higher than insurance companies will, requiring you to pay the difference. With an auto loan though, insurance companies will pay for the damage based on the vehicle’s market value, reducing the risk of your needing to compensate financially for damages.
3. Early Payoff Advantages
Instead of charging you penalties for early payoffs, auto loans enable you to pay additional amounts ahead to help save you money on interest. This early payoff is incredibly beneficial. Not only will it help you to improve your credit score, but this improved score can help you to secure other loans in the future.