Why Financing A Used Vehicle Is The Smartest Way To Go

Whether you are a first-time new car buyer or your car has gone kaput, when it’s time to get a new car, you have a pretty big decision to make. A car can cost you a considerable amount depending on what you are in the market for. The newest trend in car buying is to purchase used cars. Thanks to things like certified pre-owned cars and the guarantees that they can come with, you aren’t in the same high risk “buyer-beware” dark as could have been the case in the past. But with as low as it is, sometimes it is a difficult decision to make — new or used?

There are many reasons to purchase a used car; chief among them is that they are less expensive. That means that they might not take a huge chunk out of your monthly budget if you shop right. There are also other reasons that a used car can be a better option than buying new.

There are a considerable number of new cars on the market that are highly affordable and still fairly new. Kia, Chevrolet, Hyundai, and Ford offers many models new for under $20,000. The only problem is that typically, when you buy a less expensive new car, you can end up with a higher monthly cost due to financing and charges.

Even if you have to take out a loan for a used car, a lot of times you won’t be owing as much, which makes the loan period shorter and the amount per month much lower. That means lower financing charges over the long term. Also, financing a used car is ideal for those who have lower credit scores and aren’t able to get higher loans.

Even if you can get a loan with a low credit score, the loan amount can be astronomical because you are in such a high-risk category. If you do have a low credit rating, financing a used car can also help you to rebuild your credit, so that in the future — if you ever want to buy a new car or something bigger, like a house — you will be able to get a better rate.

Long-term loan pitfalls

When you buy a new car, the price that you pay is higher, which usually leads to a longer repayment period. Loan repayment periods continue to increase. In fact, they are up by almost 12% and are on the average anywhere from 73 to 84 months. That means by the time you pay off your new car, it will be nearly a decade old and not even close to worth what you paid for it. If you take out long-term loans, you can lose money on many fronts.

The more months you take to repay, the more you pay

The longer you take to repay a loan, the more interest you pay on the car overall. When you finance a car, you end up paying for the finance company to lend you money, which can end up with you paying almost double what the car is worth by the end of the loan.

With a longer-term loan, it may be that if you want to sell the car, upgrade, or even trade it in, you can run into a situation where you have negative equity. There are occasions where just to get rid of the car or sell it, you end up having to pay. If the car floats in value to more than you owe on it, that is on you. The financing company won’t care, nor will they make you a deal.

Your financial situation might change

Over the course of seven to eight years, your financial situation can change drastically. What you might have available to spend in your monthly budget now might be much more than you will have when your responsibilities increase, you change jobs, or you begin a family. Again, your financing company won’t care if you don’t have enough to pay in five years; that will be on you and it could jeopardize your future.

The best way to keep your financial future safe is to buy a used car that is well within your price range. A good idea is getting one that is new enough to not have to deal with a whole lot of maintenance issues, but doesn’t cost you an exorbitant amount or have you risking your financial future. Getting a certified pre-owned car might be the fiscally smart way to go.

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