What is Vehicle Financing?
When you make the decision to buy a vehicle you have a few choices. You can finance, lease or pay cash for the vehicle.
Each method has pros and cons. You should base your decision to finance, lease or pay cash based on your individual situation. There are other factors to look at including the advertised interest rates, manufacturer rebates and cash purchase incentives.
When you choose to finance a vehicle, you’re agreeing to purchase a vehicle with the payments spread out over a set period of time. This is also know as the financing term.
Financing a vehicle simply gives you the flexibility to be able to get into a vehicle without having to pay the full amount of the vehicle up front.
Depreciating Investment
When you finance a vehicle you’ll be building depreciating equity while you drive and pay down the outstanding balance.
The best way to look at financing is to see the vehicle as a depreciating savings account. You make a monthly payment towards an asset that depreciates but you’ll still be building up equity.
This is in contrast to a lease, where there’s no equity built during the lease term. While your monthly payments are higher when you finance, remember you are building equity in the vehicle. Once your last payment is made you’ll also own the vehicle.
Why Choose Financing?
When choosing to lease vs finance a vehicle, you have to ask yourself a few questions.
- Do you like to drive your vehicle “into the ground?”
- Do you travel frequently or will you put a high number of miles on the vehicle?
- Do you enjoy the feeling of “owning?”
If you answered yes to the above questions, than financing is probably the direction you should take with your vehicle.
If you want to buy a used vehicle you will not, for the most part, have the ability to lease it. Which leaves financing as your only option.
Summary
If you’re the type of person that drives vehicles for 7 or more years or will put a lot of distance on the vehicle, than financing is for you.
The idea of the financing guide will be to educate you on the ins and outs of financing a vehicle. You’ll learn negotiation techniques and how to make sure that you leave a dealership happy with your purchase.
