Car loans are very common when a person wants to acquire a vehicle. It is very unusual for an individual to pay for a brand new vehicle in cash unless he or she has extra cash to do so. There are several advantages and disadvantages of getting financing for an automobile.
One of the advantages of getting automobiles through car loans is the fact that the buyer does not need to fork out the entire cost of the automobile just yet. Although most financing schemes have a down payment requirement, it is just a small percentage of the whole price of the automobile. In fact, the percentage of the down payment is something that can be arranged between the buyer and the financing institution. There is a minimum amount required but it is quite low. With a low down payment, the person who wants to buy a vehicle can actually afford one with just a specific down payment. Another benefit of not using up all that money to buy the automobile in cash is being able to use it for other things. The very large amount of cash necessary to purchase an automobile can be used to purchase other necessary things or pay the bills. Saving to pay an automobile in cash can also take a lot of time; time during which the automobile in mind becomes outdated and other newer versions become more expensive, requiring more time to save up. Car loans for second hand vehicles are also available for those who need it. There is usually a limit to the age of the automobile when it is a second hand vehicle as well as a limit to the amount that can be borrowed. Getting financing can also bolster one's credit rating especially if the buyer of the automobile is a good payer.
One of the primary disadvantages of financing a vehicle is the length of time that a person may need to make payments. This is especially true for instances when an emergency comes up and the monthly payment may be used for another purpose. If the owner of the vehicle has already paid the monthly payment for the vehicle, then he or she will not have any money for emergency purposes, as opposed to having paid for the automobile in full and in cash. Financing can tie up one's finances for the span of the time that it lasts. Another disadvantage of getting car loans is paying in monthly increments for the automobile for four to five years with the vehicle depreciating during this time. The interest for the financing can also be quite daunting especially when the buyer chooses to get a longer period of time. Financing can also put a damper on the choice of vehicle that the buyer wants to get. Some companies do not offer the amount that is needed for a specific model or brand and this can be disappointing for the buyer especially when he or she has their heart set for a specific brand model.