By the time you learn how to drive, there is just one thought in your mind—how to get your own car. If you want to drive your own car, there are a few options available to you: you can buy one or you can have one financed. You can also just opt to lease a car or engage in a car-sharing service so you can drive a car when you need one. Of the first two choices, financing is the most viable option. Buying a car can burn a big hole in your pocket, whether it is a brand new one or a secondhand car. However, before you decide to get car financing, here are a few pros and cons to decide whether financing is suitable for you:
Pros
Financing allows you to purchase your car without paying the full purchase price upfront. Depending on the terms of your car loan, you can pay for it in monthly payments, for a period of a few years. Young adults take this option most of the time because it allows them to pay the installments from their monthly income. The interest can be quite high when you think about it, but the convenience of paying in monthly installments outweighs the burden of interest costs.
Cons
Sadly, if there are pros, there are also cons to car financing. Financing may be easier on the pocket in terms of the actual amount leaving your wallet every month. However, the payments are spread across several years. After five years of monthly installments, you might find that the car already needs some repairs from the wear and tear and you’re still yet to pay it fully. The number of interest payments can also total to a big proportion of the purchase price of your car, money that you could have spent somewhere else.
When you are financing a car, the title to the car remains with the bank that extended the loan to you. Technically, you still don’t own the car but you’re already paying for repairs, paying for insurance, and other expenses. Another argument against car financing is the threat of repossession. You might find yourself just a year and a half shy or a few months away from fully paying the cost of financing, but due to unforeseen circumstances, you are unable to pay at least 3 monthly installments. In cases like these, the bank has a right to foreclose on your car mortgage and repossess the car. You end up with no car even after you have paid more than a couple of years for it. If you want to regain possession of your car, you’ll be required to pay the outstanding fee, as well as other costs and expenses of repossession.
Financing can be the lifesaver that enables you to buy your own car from your monthly income. However, you run the risk of losing everything you paid, as well as the car you partially paid for. Are you up for the risk? It’s your choice.
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