Purchasing a car can be a joyous event if it is a planned upgrade or a stressful occurrence if it happens out of necessity. Either way, buying a used car can pose a significant expense. Unless you have specifically set money aside for the purchase, it can be damaging to your savings. Luckily, many lenders are offering auto loans on used cars that are very affordable and have a number of benefits over paying cash for the purchase.
Free Up Cash Savings Or Investments From Your Car Loan
Taking out a car loan on a used car is a great way to preserve your savings or investments. For some, purchasing a car outright can exhaust the money they’ve put away in the bank in case of difficult times. If you fall into a rough situation after spending all of your savings purchasing a vehicle, you may be left with fewer options than if you had financed the vehicle purchase. By obtaining an auto loan for the vehicle, your cash reserves can help carry you through a rough patch while also paying for the loan’s required monthly payments until you get back on your feet.
For more established car buyers who have money saved away in investments, it may be more logical to keep their funds where they are. If the return seen on their investment account is higher than the interest rate that would be paid on an auto loan, taking money out of their nest egg would end up costing more over time.
Your Bank Likely Offers Deals On Auto Loans For Current Customers
Instead of going through the car lot’s financing department to obtain a loan, consider meeting with the loan officer at your bank. A lot of the time, banks will offer very attractive package deals to their customers in order to retain a larger portion of their business. If you already are using multiple products from a financial institution, such as checking and savings accounts, credit cards and a home loan, ask about any special promotions they can offer you on a used auto loan.
Take Advantage Of Interest Rates While They’re Still Low
Interest rates are still near all-time lows. Despite slight increases seen in recent months, most banks are still offering extremely competitive rates on auto loans. Most major Canadian lenders offer amortization options for auto loans that can range from one to eight years, giving you the ultimate flexibility to choose a loan that fits your budget, all while taking advantage of the very affordable interest rates.
Of the three reasons to get a car loan on a used auto, this is the most time-sensitive – great rates are not going to last forever, and it is crucial to begin your search for an auto loan now while the cost of borrowing funds is still so low.
Taking out a car loans for a used car is not the right choice for everyone. Each financial situation is going to be a little bit difference, so be sure you compare how taking out an auto loan will affect your finances. For some, paying in cash may be easier than managing a payment schedule each month. For others, taking a loan out may help with cash flow issues and to ensure enough money is saved away for emergencies. If you decide to go with a loan, meet with various automotive lenders, including your own bank, to find the most affordable option available to you.
