Pros and Cons to Financing or Leasing a New Vehicle
Most people finance their cars these days whether it is from a used car dealer or a new one. Most dealerships from Subaru car dealers to used Chevy dealers will sell new and used cars, it’s just that they will typically specialize in one or the other. For example, used car dealerships may be known that way because they mostly have used cars, but they may have a few new cars as well so as not to block out that audience of customers. However, the focus of their business will be on selling used vehicles. If you go to a car brand dealership like the local Subaru dealership, then they will definitely be selling both new and used and don’t usually have a specific specialization on either kind. Now, once you are at the Subaru car dealers, you should know the pros and cons to financing versus paying cash and owning outright. Let’s take a look at some the advantages and disadvantages to financing a car at a place like a Subaru car dealership.
Advantages to Auto Financing
- Investment – One of the main advantages in financing a new car is that it is an investment. If you buy a car outright, you won’t be able to resell it for very much but if your car is brand new, it’s going to be a long time before it’s value goes down very low. You could also use it as a decent trade it if you decide that you want to get something else further down the line. It’s easy to maintain and upkeep because there is nothing wrong with it when you first buy it.
- Credit Building – Paying monthly payments will look great on your credit report if you are needing to build up your score. According to the FICO website, new credit determines 10 percent of your overall credit score and installment accounts make up yet another 10 percent. Car payments are considered an installment account and so can be very beneficial when trying to build credit.
- Guaranteed Condition – The nice thing about buying a new car is that you know there is nothing wrong with it from the get go. The dealership will have all the paper work from anything that has been done to it but if is brand new, it shouldn’t have needed anything, even an oil change yet. It can give you a great peace of mind knowing that no one has driven it before and done anything negative to it. This makes it an incredible reliable vehicle.
Disadvantages to Auto Financing
- Depreciation – New cars depreciate in value very quickly. Say you buy a brand new car at the Subaru car dealers, as you drive off the Subaru lot, almost immediately your car will begin to lose value with every mile that you put on it. Some models depreciate faster than others, so you would want to find out which ones before making your decision. You can easily end up owing more than you car is worth.
- Initial Cost – From the get go, you will pay, on average, $20,000 more for a new car than you will a used car. Even a car that has a couple thousand miles on it, which is still fairly new. You are literally paying for the bragging rights to say no one has driven this car but you. Is $20,000 plus whatever the car is actual worth, as well as the fees, taxes and mandatory full cover insurance worth those bragging rights? Well, the answer to that is entirely up to you.
- Mandatory Insurance – this is mentioned just above and it’s true; if you finance or lease a car, typically the dealership will require you to have full coverage insurance while you are paying off the car. This is to cover them more than anything. They want to know that should anything happen, the car is covered and they will still get the full amount of what the car is worth. Liability only covers the other driver if you are at fault in an accident. If your car is not covered, chances are, the dealership will never see that money from the car you just bought.