When you are getting yourself a ride, you can opt for two modes of payment. You either pay the entire amount in cash up front, or you can get it financed. While most people prefer to buy it in cash, there are times when you might want to give financing the vehicle a try. So, here are some pros and cons of financing a vehicle that you should know about.
Pros of financing a vehicle
Before you choose to finance your vehicle, you should know both the pros and cons of the same. So, here’s throwing some light on the pros first.
- You can customize as much as you want to
Once your payment schedule is over, you will be the owner of the vehicle. Therefore, you have the freedom to customize your vehicle to your liking, even before you have paid the entire amount to the bank. If you opt for leasing instead of getting your vehicle financed, you would be under the obligation of returning the vehicle in its original condition once the lease ends.
- You can sell it whenever you like
Once the payments are made, you can own the vehicle. This makes it easy for you to sell the vehicle even before the payment is settled completely. If you do not like the model or want to own something which has hit the markets recently, with financing, you have the freedom to sell the existing car and own whatever you want to. You do not get this choice when you lease a vehicle.
- There is no limitation on mileages
When you get a vehicle on finance, you get the freedom to drive as many miles as you want. This is not something you get to enjoy when you lease the vehicle. In leasing, the dealer usually sets the limits of miles you can drive in a year. But with financing, you own the vehicle, and there are no guidelines that you need to follow.
Cons of financing a vehicle
- You have to pay an interest
Just like any other loan, financing a vehicle requires you to pay interest on the principal amount that you have borrowed from the bank. This significantly increases the cost of the vehicle.
- Buying more than you can afford
When you go to a showroom to buy a vehicle, you will be surrounded by vehicles that will tempt you, but at the same time, will also be out of your budget. Since your entire payment will be divided into monthly payments, you might end up thinking that you will manage the finances later and end up buying the car that you cannot afford.
- Higher insurance
When you are getting a vehicle financed, it is usually in a new car. This can have an impact on your insurance premiums. Auto insurance premiums tend to be higher on brand new cars, and hence, you might end up shelling out some extra money.