So you’re ready to buy a new car. That’s great, but first you need to figure out how you should go about paying for that car. Traditionally, there are three ways to do so: cash, lease or financing. There are advantages and disadvantages to each, and the right choice will depend on several different factors.
The following is a short introduction and breakdown of each of the three options. Hopefully after reading through these, you’ll have a better idea of what is best for your situation.
While we said above that there are advantages and disadvantages to each of the three payment options, if you can afford to pay cash for a vehicle, there are almost no downsides to this option. This is the only one of the three that ensures you won’t have a monthly car payment, and that alone will make you the envy of anyone leasing or financing a car. Just make sure you don’t clean out your bank account or leave yourself with little cash reserves in the event of an emergency.
Leasing a vehicle is a good way to get the car you want for lower monthly payments and less of a commitment than financing a vehicle. It’s also the best option if you tend to get new vehicles every few years, and since you’ll only have it for a few years, the car will likely be covered by a warranty for the entire time you have it. But there are downsides as well. With a lease, your mileage is limited and can negatively affect you at the end of your lease if you go over the allotted amount, though you can always pay a little extra every month for more mileage.
Financing a vehicle is the way to go if you’d ultimately like to own your vehicle but don’t have the funds to pay cash for it right away. There are many factors to consider when pursuing vehicle financing, including down payment, length of the lease (typically anywhere from 3 years to 6, or more), interest rate, and more. If you’re going to be financing your car, you want to make sure you’re getting the fairest deal and won’t be spending more than you should be every month because of hidden fees or interest. With that in mind, it’s best to negotiate the final sale price, not the monthly payment price, the latter of which allows dealers to hide fees and interest rates more easily.
So there you have it. Three unique options for bringing home that new car. This is of course a brief introduction and there is more to be learned about each, but hopefully this helped to steer you toward which option works best for you.