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Finance or Cash for your New Car?

So you have saved up for a while now, and think you have enough to buy the new car you have been dreaming of. But is it a smart move to use the cash you have? Should finance even be an option?

It is a common misconception that is you pay cash, you should get a better deal. Well this is simply not true. Think about how this works….if you offer cash, the seller gets only the asking price. If you take a finance package, the seller also receives a finance commission. You are more likely to get a deal if the seller is making a little extra. Makes sense doesn't it.

Putting that aside for a moment, is it really the best way to purchase a car by paying cash? That depends entirely on how you feel about the money you have sitting in the bank, and the type of car you are looking for. If for example you have saved up $7,000 to buy a car, then that is the limit you can spend if you intend to pay cash. However, if you choose to finance, the sky is the limit (within reason of course). You may in fact be able to buy a newer vehicle that will last longer and be more reliable.

You should also consider the finance rate and the extra benefits available if you do finance your new vehicle. Finance rates on vehicle finance are not as high as they used to be, and if you qualify for a decent finance rate, you may find your overall interest cost is not much considering the quality of vehicle you are buying. The interest charge may in fact be less than the unplanned maintenance you could end up paying for on the older cheaper vehicle.

Another thing to consider is the added mechanical warranty that you should always purchase when you buy a used car. Even new cars have warranties, so why would you ever not want to protect a second hand vehicle? If you are using cash, you may be limited with the options for buying a warranty. And as is normally the case, the shorter the term of the warranty the more expensive it can be. But, if you are financing your new vehicle, the warranty can be added to the package for only a few extra dollars per week.
And finally, another great reason to use a finance facility is to establish a credit rating. Borrowing money and repaying it with a finance company will provide you with a great reference for next time you borrow. This may mean a lower finance rate next time, or an easier approval when looking to purchase something bigger like a boat or a home.

Cash is great to have, and saving is a good thing to do. But finance can also have its advantages. It will depend entirely on your situation, needs and wants. There is not right or wrong, as long as you make an informed decision.

At Dave Allen Motors we want to make sure your vehicle buying experience is simple and hassle free. Our specialist Business Manager will tailor a finance package that you are completely comfortable with, one that suits your budget and your lifestyle. Phone us on 0800 227 000 or apply for finance now.