How does financing a car work? When it comes to making large purchases like a home or a car, most people don’t have large sums of cash in their savings accounts just waiting around. But if you do in fact have thousands of dollars tucked away somewhere, then there is a clear benefit in putting it towards your car purchase. But there's also benefits to keeping that money in your pocket.
The main benefit of a cash purchase is that you get to avoid paying interest.
If you have the money ready to purchase a vehicle, it might seem like a no-brainer to pay outright and avoid the interest charges, but it’s not always the best option.
The biggest advantage of financing a vehicle purchase versus paying cash is that you can buy the car now without paying a single dollar upfront.
So what does financing a car mean? Simply put, financing a car means borrowing money from a bank to pay for your vehicle purchase and paying the bank back in manageable installments. House of Cars can offer zero money down payment options*, which are quite popular simply because a lot of people either don’t have the money to put down or have a better use for their savings. Intrigued? Read on!
For the average car buyer, a car loan opens up more vehicle options. When you’re able to borrow the money and pay it back over a manageable period of time, it gives you the opportunity to buy a car you may not have been able to afford if they were paying cash. That Honda you were looking at paying cash for could become a Mercedes-Benz!
But even if you have the savings to pay for that nicer car in cash, financing can be the better decision for multiple reasons:
- Rather than spending your cash on a car, you can use that cash to invest in other opportunities that will see the money grow, like investing in real estate or investing in stocks, mutual funds or EFTs. The money you make from your investments very well might cover the cost of your monthly car payments, or at least a portion of them! To be rich is to afford a nice car. To be wealthy is to be able to use the same money to invest and afford that same car using the proceeds of their investments.
- Rather than put all your free cash into a car purchase, it’s important to have enough savings to pay for an emergency expense such as a home or car repair.
- Buying a car with zero down payment can also free up your income for other debt obligations with higher interest, like high mortgage payments, lines of credit or credit card debt.
- Did you know that we can often find our customers an interest rate that's cheaper than the interest rate of a line of credit?*
Being smart with your money certainly has its advantages! Keeping your money in your pocket and leveraging it to make more money is the smarter decision than putting it all towards a vehicle, which will lose value over time.
If you decide to pursue financing, it’s best to choose a monthly payment that is manageable for your budget. We can offer auto financing options for every budget. Check out our car loan calculator for a rough idea of what your monthly instalment could look like.
If you’re not sure what amount you can get approved for, you can get pre-approved before you even start the financing process. House of Cars can help you get pre-approved and connect you to dozens of $0 down lenders. Apply with us for free in just a few minutes!
