Saving Up for a Car
Buying a car is a huge investment for anybody, so how you decide to pay for that car is a decision that requires a lot of thought and consideration. Depending on your current financial situation, you're probably going to lean towards financing a car in a particular way. If you have a lot of money saved, you’re most likely going to put a large down payment on the car and lower your monthly payments. If you don’t have money saved, you’ll likely do a minimum down payment and have higher monthly payments. In this article, we’re going to talk about the pros and cons of saving for a car.
Pro #1: Saving Up Means a Lower Monthly Payment
If you’re in a position where you’re able to take a chunk of money out of each of your paychecks and put it towards car savings, that’s fantastic. If you do this for a year and are able to build up a car savings account of a few thousand dollars, you’ll be ahead of most people! Putting a down payment on your car will lower your monthly payments, making them easier to manage throughout the financing period.
Pro #2: Saving Up Should Lower Your Interest Rate
The more you save, the more you can afford to make on a down payment, and the less amount of money you're asking from the lender. The less money you’re asking from the lender, the more confident they’ll be in giving you the loan, which should reduce the interest rate they approve you at.
Con #1: Saving Takes Time
The main con to saving for a car is it can take a lot of time to save up. If you urgently need a car, you’re not going to have the ability or time to save up. So if you’re in a situation where you need to get behind the wheel of a car as soon as possible, saving up to make a big down payment may not be feasible.
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