If you have the means to do so, paying cash for your next vehicle is a great idea. You would be forgiven for thinking that everyone has to finance or take a loan for a car, but this isn't true. Many people know the benefits of paying for a car with cash and take advantage of it. You should too!
Any type of loan has interest, including a car loan. Interest is basically a fee that is charged to a car buyer for borrowing someone else’s money (in this case, the bank’s money). It can range from 0.1% to 9%, or more. By paying cash, you avoid losing money in interest. This can add thousands of dollars to your loan over the amount of time you pay off the car. On the other hand, if you pay cash, you would only be paying for the negotiated price of the car.
By paying cash, you won't have monthly payments. Let's say you agree to purchase a used car and pay $200 a month for the next five years. No big deal right? It may be feasible now, but life circumstances change. What if you lose your job? What if you become very ill? All of a sudden, that $200 may seem like an astronomical fee. By paying cash, you won't set your future self up for a payment you cannot make.
So just by purchasing a used sedan in cash, you're saving money. Beyond the initial savings at the dealership, you'll also be saving money every single month. This is because your insurance will be lower. Your car insurance has to cover what your car is worth in order to replace it in the event of a major wreck or other catastrophes. This is known as a "total loss." If your insurance has to cover a $20,000 vehicle, you're paying more each month than if it were to cover a used vehicle worth $10,000.
Comprehensive Coverage and Collision Coverage helps pay to replace a totaled vehicle in the event of a total loss. If you're leasing or financing a car, many lenders require you to have Collision and Comprehensive Coverage on your car insurance policy until your car is paid off. Your monthly premium will be higher and your deductible, the amount you pay before they pay the rest, will be higher too. If you pay cash for your vehicle, you don't need this. If your car is paid off, many types of insurance coverage is optional - saving you money each and every month.
It usually takes time, commitment, and a bit of research to find a great used sedan for sale in Wallingford, CT to make it possible to pay cash for a car. It's worth it! Make the effort to find a great vehicle you can pay cash for and you'll love the freedom of having a quality vehicle without making a monthly payment to drive it.