Why Financing a Car is a Good Idea
There is really only one reason you would finance a vehicle instead of buying the vehicle outright.
If you are disciplined and actually have the cash saved and have it invested in an interest-bearing account at a much higher rate than the financed amount.
Is it better to buy or finance a car?
Most people think buying a car with cash is better than financing, simply because you don’t have to pay interest. Generally, if the interest rate you earn on your savings is lower than the after-tax cost of borrowing, paying cash is the way to go. However, you don’t have as many options when you pay with cash.
Is car financing a good idea?
Is Financing A Used Car A Good Idea? First, they get you on the financing. If you buy a used car on the payment plan, expect to pay more — often, a lot more — for the interest on the loan. Many new cars can be financed with no money down and 1-2 percent (or even 0 percent) interest.
Does having a car on finance affect mortgage?
Lenders use your debt-to-income ratio (or the amount of your monthly debts versus your take-home pay) to determine your ability to repay your mortgage. Under the new qualified mortgage rules, your monthly debts—including your auto loan—cannot exceed 43% of what you bring home.
Photo in the article by “Flickr”