Purchasing a car is not the type of decision that should be made without careful consideration. From buying a car cash to financing the purchase, there’s a lot to think about. And since a car is likely the second priciest purchase you’ll ever make, it’s essential that you understand your options.

Buying with cash

The least expensive way to buy a car is to buy it outright with cash. This eliminates the need or an auto loan or financing agreement. You’ll own your car with no monthly payment! This means no threat of repossession and no added monthly payment expense. Your only expenses will be vehicle maintenance, insurance, annual taxes (tags) and gas. This is always the best option if you’re working towards financial freedom or don’t want to increase your monthly bills.


Financing

If you don’t have enough personal savings to buy a car outright, you’ll likely have to finance the purchase. You can, however, use some of the savings you do have to put towards a substantial down payment. And while an individual loan is usually the least expensive way to finance; You’ll get the best terms if you have a good credit history.

Tips:

  • Always shop around to make sure that you’re getting the best interest rate possible.
  • Check with your local credit union first. They often have the best terms for vehicle financing. 
  • Avoid buy-here-pay-here at all costs.

simple guide to credit


Alternative purchase options

Credit Cards

Some people have substantial credit card limits and they are able to use one or more credit cards to pay all or part of the vehicle costs. If this is an option for you, there are a few things to keep in mind before making a final decision. Using credit also means taking on new debt. Be sure that you’re able to handle the added monthly expense and that you can make the regular monthly payments. Also, if you’re buying from a car dealer be sure to ask if they charge credit card handling cost – which can sometimes tack on an additional 3%.

Tip: If they do charge a credit card processing fee, you should be able to negotiate to not pay it.

Co-signer

If you have little or no credit… or you’re in the process of rebuilding your credit, you may need a guarantor to co-sign for your auto loan. Be careful though, guarantor loans rely on another person, usually a parent or family member, being responsible for the repayment of the loan should you fail to make your payments on time. Although this negates the necessity of having a good credit history for the best terms, you must be completely sure that you can make payments. You don’t want to be responsible for damaging your guarantor’s credit rating or financial situation, or putting your personal relationships in jeopardy. 

Tip: Do your research. When you’re in a pinch finding a co-signor may seem like a great idea, but you want to make sure that you take time to truly understand the process. You can find plenty of advice at sites such as guarantor.loan


There are several ways of funding your next vehicle but it’s important that you invest time into understanding your options. If you’re wanting or needing to finance, know how much money you can afford to put down on and check your credit ahead of time. Talk to your bank or credit union and see if you qualify for any of their programs. The best thing that you can do is empower yourself to make sure that you’re getting the very best terms that you qualify for.