Buying a car is a major financial decision, and that means you should be giving the financial side the equation a good deal of thought. Quite frequently, people mistakenly believe that the financial options where buying a car is concerned are limited; however, this is generally not the case. Take, for example, the situation of paying cash for a car. Having the cash on hand to pay for a car doesn't necessarily mean that you should do so. In fact, many experts would advise that you evaluate your finances as a whole to discover what car buying option is best for you. In this article, we will explore whether or not you should pay cash for a car and some of the key points you should know.
Point One-What About Your Credit Score?
Some people are very opposed to debt in all of its forms. Yet, this isn't always the best course of action. Not all debt is bad. For example, having debt and consistently paying it back is one of the cornerstones the credit rating agencies use in establishing your credit score and your credit worthiness. In particular, credit agencies look at major purchases, such as a home or a car, with great intensity. If you have a history of credit issues, for example, you may actually want to buy your car on credit instead of opting to pay for your car in cash.
Other Ways to Get a Great Credit Rating
- Have a perfect payment history
- Make sure there are no errors on your credit report
- Reduce credit card debt
- Have a low debt-to-income ratio
Point Two-What Else Could You Be Doing with the Cash
Before paying cash for a car you need to ask yourself, "what else could I be doing with this cash?" Issues such as credit cards, buying a home or investing in your education are all additional options. These three options may be better ones for your particular financial situation than paying cash for a car. Remember car dealers have a variety of ways to get you in a new car ranging from no percent down to no down payment options.
Point Three-Upgrade to a Better Car
If you have the money to pay off a car in full, this does mean that you have another option, namely upgrading to a better car. You could either make payments or make a larger downpayment on a higher quality car as well. The bottom line is that with the cash on hand, you have a variety of options.