Purchasing a car can be costly and unaffordable, but if you can't commute to work or fulfill important tasks without a vehicle, it may be the only suitable option. An auto purchase raises the question: should you buy a new or used car? Read on to make an informed decision about the right car loan option!
Car loans are considered secured loans, as the auto you buy is collateral. It means that if you fail to repay the debt, you will lose both your vehicle and money.
Auto loans are a type of installment loan where you borrow the funds in one lump sum and then repay them through equal monthly installments.
Depending on your budget, you can choose a loan term ranging from 24 to 84 months to repay the loan. Remember, the shorter the term, the more you save on interest rates.
When it comes to purchasing an auto, most people tend to buy new cars. Applying for a new auto loan, they can enjoy the following benefits:
More reliability. When you buy a new auto from the factory, you can be sure it is safe and sound. You can save money on repaying and improving the car.
Lower interest. The APR for new car loans is typically lower than for used auto loans despite a longer repaying period.
Latest models. New vehicles have the most recent technologies, allowing you to enjoy the best features and advanced models.
It is not a problem if you can’t afford a new car. Purchasing a used vehicle also has numerous advantages, such as:
Shorter loan term. Taking a used auto loan may be the right solution if you don't want to repay your debt for years. These loans generally have shorter repayment periods, allowing you to become car-payment-free sooner.
Saving money. Used cars are mostly cheaper than new ones, allowing you not to pay significant amounts for a vehicle.
Avoiding depreciation. Statistics show that new autos lose a percentage of their value in the first year, which means you will lose the funds. Therefore, buying an old vehicle can protect you from owing more than the car is worth.
Choosing between new or used car loans depends on many factors. If you want to repay the debt quickly, save money on the purchase, and avoid depreciation, it is better to invest in an old car. However, if your priorities include using the newest technologies and driving the latest car models, and you are willing to accept higher interest rates, purchasing a new car is the right option.
Carefully assess your financial situation and make your life easier by purchasing a car that suits your needs and budget.