Is it Better to Take Out a Loan for a New Car Instead of a Cheaper Second-Hand Vehicle?

Understandably, some new car buyers might have reservations about the whole process. They might be coming from the angle that you pay less if you can buy a car for cash and if you don’t have a whole lot of money saved up, you have to be content with buying yourself a cheaper car rather than something brand new.

On the one hand, this idea makes sense. After all, the less you borrow, the less interest you’ll have to pay. And it is also true that if you aren’t rolling in money, you are wise not to buy the most expensive car in the sales yard.

But you can go too far in this direction. Sometimes, what you’ll pay in interest when repaying a personal car loan turns out to be less than what you can end up paying if you buy a car that’s too cheap or rather unreliable.

It’s also important not to be wedded to a particular make or model of car. In effect, remove some of the emotion from the process. Be prepared to compromise on what you may have originally wanted, and rather, settle for something that is reliable and manageable to pay. This should also include maintenance, because the last thing you want to happen is to be stuck with a car where the repair bill just adds to your financial woes. If that happens, you have a car that probably costs you as much as the loan repayments would have on a better car.

All in all, think about this situation carefully. If you’re on a budget, it may be wiser over the long run to buy a slightly more expensive car, even if that means taking out a loan, as opposed to buying a more affordable car that proves to be unreliable from the get-go.