Should You Go For An Old Car Or A New One?

Published in Tips

Car loan financing is not as hard as it once was. But while that has become easy, the dilemma occurs of choosing between a new car and an old one. Both choices have advantages as well as disadvantages and often making the right choice is not very clear cut. The truth is the ultimate arbiter for your choice should be your budget; without this, making any sort of choice is going to be difficult.

Buying a new car has obvious advantages, but from a financing standpoint the benefits are quite pronounced. One of the biggest benefits is the possibility of a payment holiday. This occurs when the loan company as a reward for borrowing lots of money, allow a period where you don’t have to make repayments. Typically, this period lasts anywhere from 3 months to 12 months. But buying a new car also poses the problem of having a large loan to service. Many would argue that in these uncertain economic times, it is never safe to borrow money for a new car.

This brings us to the second option of buying a used car. Again the benefits here are many, but chief among them is the low loan requirements. This occurs naturally because the amount you are borrowing is less and so poses a lower risk to the lender. Interest rates might not be as low as a new car loan, but you get the added benefit of freeing up cash for other things in your life. Used cars have the obvious disadvantage of value depreciation and often you can end with what is called an ‘upside down car loan‘. This is what mortgager call negative equity and occurs when the actual value of the debt is more than what can be recouped from the sale of the asset.

Based on the outline of advantages and disadvantages of both options above, it should be obvious that a budget is the one thing that can reasonable tip the scale either way. People with a sizable disposable income are best placed to borrow money towards a new car. Those with small disposable incomes should always take the cautious approach and borrow within their means.

Whatever the choice taken based on budget, you’ll need to find a lender. This is really the easy part and many online car loan finance companies can be found on the internet. There are so many operating that is often prudent to do a bit of comparison shopping before making a commitment. You should also make sure the lender is Better Business Bureau (BBB) approved — especially if you are looking to buy a new car and there’s lot of money at stake.

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