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After five years, you would have made over $10,000 and you would own a vehicle worth over $11,000 (after depreciation). Of course, this is a fairly idyllic picture. Investments don\u2019t always perform well. If you lose money, you must still repay your car loan.<\/p>
Additionally, car loan interest rates have been rising steadily for years. If your portfolio\u2019s average annual returns are lower than your car loan interest rate, you\u2019d be better off buying a car outright.<\/p><\/div><\/article><\/div>\n <\/div>\n<\/li><\/ul>
2. You want to lower the upfront cost of buying a car<\/h4>
Another reason you might want to borrow is to avoid creating a car-sized hole in your bank account. Financing allows you to break up a purchase that might cost tens of thousands of dollars into repayments that barely affect your budget. This is particularly worth it if you can qualify for a low interest rate.<\/p>
3. You want to build your credit<\/h4>
Another advantage of getting a car loan is that it can build your credit. If you\u2019ve paid in cash and avoided loans in the past, financing a car can start building your credit history. This can be advantageous given than car loans often come with lower rates than other forms of debt like unsecured loans.<\/p>
Aside from establishing a track record of making on-time payments, auto financing can also diversify the types of credit on your report, boosting your score overall.<\/p>
4. You want to increase your savings<\/h4>
Instead of spending money on a new car, you can use put it towards a retirement fund, your child\u2019s education or a rainy-day fund. Savings accounts<\/a> earn money over time and are relatively easy to access if you need fast withdrawals. If buying a new car outright means draining your emergency fund, financing might be the way to go.<\/p>5. You can get a better deal with dealership financing<\/h4>
Dealerships want customers to buy a car with financing rather than cash. This is because salespeople make a commission on your loan if you borrow through their dealership.<\/p>
They\u2019ll often knock down the price of a vehicle as an incentive to get you to buy a car with financing instead of cash. They might even offer low-APR financing to borrowers with excellent credit if they need to move cars off the lot.<\/p>\n
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