Quick Answer: Why Is It A Bad Idea To Finance A Car??

Why Financing a Car is a Good Idea

There is really only one reason you would finance a vehicle instead of buying the vehicle outright.

If you are disciplined and actually have the cash saved and have it invested in an interest-bearing account at a much higher rate than the financed amount.

Does financing a car mean you own it?

Financing a car means you’re borrowing money from a bank or financial institution so you can purchase the car from a dealership or private party. For me, financing a car means suddenly having to commit to a huge chunk of debt and pay the bank more money in the form of interest.

Is it better to finance or buy a car?

Most people think buying a car with cash is better than financing, simply because you don’t have to pay interest. Generally, if the interest rate you earn on your savings is lower than the after-tax cost of borrowing, paying cash is the way to go. However, you don’t have as many options when you pay with cash.

How does finance a car work?

You might borrow money directly from a bank, finance company, or credit union. In your loan, you agree to pay the amount financed, plus a finance charge, over a period of time. Once you’re ready to buy a car from a dealer, you use this loan to pay for the car.

Photo in the article by “Wikipedia” https://en.wikipedia.org/wiki/Flat_rate_(finance)