The common practice when buying a new car is to get an auto loan, where the car is paid for immediately, and you then pay it back with interest over the next few years. But maybe that sounds far too complicated, is there anything stopping you from just walking into the dealership with a big bag of money and buying a car on the spot? This Article will try and answer the Question.
Can You Buy With Cash?
This is a question with multiple recipients, the first being you personally. Most people do not have a giant pile of money to buy a car lying around. That’s why car financing exists. But for the sake of argument and this discussion let’s assume you do.
The second recipient is the dealership, and the answer is that it depends, some dealerships simply don’t trade in cash, they don’t have the facilities to deal with it as their whole business is set up around auto loans, but there are still dealerships that will accept a cash payment. So the answer is yes, but only sometimes.
Should You Buy With Cash?
Just because you can, does that mean you should? In many ways that’s the more interesting question. The very obvious benefit to buying the car with cash is that you don’t have any interest, and you don’t have any monthly payments, you buy the car, it’s yours, just like a regular purchase, how could there be any downsides to that?
Well this is where we have to acknowledge the fact that finances are not logical. And that financially it may be more beneficial to take the loan anyway, even if you don’t need it. One of the most important numbers in your life is your credit score. It determines the loans you can get. If it’s good you get better loans, if it’s low you get worse, and that applies to all loans including cars, personal, student, and probably most importantly mortgages.
Your credit score is only built up if you get loans, and if you buy everything with cash, you don’t build up that score, which might bite you in the back later in life.
Another reason is that thanks to savings accounts having lots of cash can make you more cash. So you can use that money to buy a car, or you can put that money in a savings account. You’ll be paying interest on the loan, but at the same time you’ll also be gaining interest on that savings account, so interest can also be working in your favour.