Many people will find that when they need a new car that they do not have much money to buy the car that they want. This is because cars can be very expensive and many of us will not have enough money saved to pay for one. This is why many people will consider borrowing to buy one. However, there are often cheaper models that we could potentially buy for a few hundred dollars that would work and could save us borrowing anything, but are they worth getting?
Advantages of getting a loan
If you use a loan to buy a car it means that there is a chance that you will be able to afford a better car if you borrow the money to buy it. This can be really good as you can get one that will last longer, that is in better condition and that runs more efficiently if you have more money to play with. This can save you money in the long term on fuel, repairs and breakdown cover. It is worth being careful though as some cars are much more expensive than they need to be and do not offer good value for money. For example, some brands are just dearer than others even though the cars have similar reliability and some models, such as sporty ones, will be dearer with very little extra benefit. Buying a brand-new vehicle can also not be wise as it can lose thousands of dollars off its value just because you have driven it off the forecourt. Therefore, it is really important to make sure that you know exactly what you want form your vehicle so that you can pick a car that has those features but not more than you need. Then you will not be paying for things that you do not need.
You will also have more choice of vehicles if you can spend more money. This means that you gave a better chance of finding one that is fuel efficient, for example which will mean that you can keep your gas bills down. You will probably have other features that you are interested in too such as the size, the infotainment system, the trunk space and possibly even the colour. Having more money to spend means that you will have a lot more choice and probably be more likely to find a car closer to what you are looking for.
Disadvantages of getting a loan
There are disadvantage of using a loan though and the main one is the cost. Obviously, when you borrow money, you will be charged interest and possibly fees as well. This means that you will be paying extra than you would if you had managed to buy the same car without having to borrow. It is therefore important to think about the car and whether you feel that it is worth this extra money. Consider whether you would have been prepared to buy it if it was priced at a higher price and how much extra you would be prepared to pay and if this is as much as the cost of the loan. If you are not sure of how much the loan will cost, then check with the lender as they will be able to let you know.
You also have to make sure that you can manage the repayments on the loan. This means that you will need to consistently repay some of it each month. It is really important to make sure that you are confident that you will be able to manage to do this. It is wise to look at how well you normally manage each month and whether this loan repayment would be easy or hard to manage. If you think that it would be difficult then you need to think about ways that you might be able to make it easier. It might be that there will be some easy ways that you can reduce your spending so that you can afford it. However, it may be that you feel that it will be a real struggle and, in this case, it could be well worth questioning whether a loan really is the right option for you. If you start to struggle you may have to sacrifice other things to repay the loan or you may end up not repaying the loan and getting into trouble that way.
Lastly it is worth considering any stress you may experience as a result of the loan. Some people will not really worry, especially if the repayments are easy, but some people really worry when they are in debt. Stress can be a big factor in our mental and physical health and it may not be worth it. You will have to decide whether you think that stress will be a factor for you or not.