Car buying guide: Should you make full cash payment or get a loan?

  • Jun 29, 2018

For some, buying a car is a passion, while for others it is a necessity. Some prefer one-time payment when purchasing a new vehicle, while others opt for a car loan. Well, whichever mode of payment picked, the decision is influenced by your current financial condition.

Let's say you have an adequate amount of money to pay the full amount for the car in cash. But, is it right to invest such a considerable sum of money in one go rather than having it invested at the right place? Whichever payment option you choose, it is always recommended to go for the best car insurance, as it protects you from numerous issues like accidental car damage.

Cash or loan

Here are some questions that you need to ask yourself, to decide whether to go for a full cash payment or opting for a car loan:

Do you have sufficient funds for an emergency?

Emergency fund

Make sure that you have enough funds in your bank account in case of an emergency. As you pay for the car in cash, there is no turning back. Some people want to keep savings in their bank account, and hence they go for a loan and pay for their four-wheeled possession via easily monthly instalments. This way they ensure that sufficient cash for any uncertain happening.

Is your savings giving your good returns?

Return on investment

Let us say you have a lot of cash locked in your home safe. This cash, behind the tough safe, is not fetching you any returns. Thus, it's better to bring it to some use and avoid the burden of a loan and interest. Else, you can deposit the extra cash in your bank account and then apply for a car loan.

Do you have the regular cash flow?

cash flow

Make a note of your regular expenditures and income. If you do not have enough cash flow even for your daily spending, then going for a car loan is the only option. This way there would be no extra burden on your regular cash flow. Also, you will get enough time to arrange the money for monthly EMIs.

You can pay off your car loan over a chosen period it could be within three to five years. However, other factors like sudden loss of job or medical issues should also be considered.

Are you already under debt?

under debt

Some people have so many loans in their name that there is no option left for them to apply for a new one. Most of their salary goes in paying for the EMIs. In such cases, the bank refuses to grant any further loan. However, you can apply for a loan on behalf of your earning family members.

Is there a zero percent interest deal on loan?

zero percent interest rate

There are banks which offer a zero per cent interest scheme for three years on various occasions like Sinulog, Pintados etc. If you get a chance of grabbing one such deal, it would be great. You can save the interest on your car loan without the need to spend your savings. Make sure to set off the significant part of the credit during the interest-free years.

So, ask yourself these questions before making a choice. Either of the two options will work fine depending on the type of customer. It is suggested to calculate the overall cost of each option.

As mentioned earlier, whichever payment mode you choose, make sure to go for a good insurance policy.

When it comes to buying car insurance, one may encounter numerous doubts and the humongous amount of options to confuse a buyer further. There are online websites that make the job easier. All you need to do is a type of name of the policies and compare the offers provided by each one of them.


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