If you pay cash for your car, there can several advantages, as well as disadvantages. It depends on your financial goals. Before you decide, explore all of your options.
Potential
Paying cash for your car means you will not have a car payment. The money you would normally put toward a car payment can now go toward paying off other debts, such as credit cards.
Investments
If you choose to finance, then the cash that you pay for a car could be invested. Compare the interest you pay on a car loan against the interest you would receive from such an investment.
Benefits
When you pay cash for a car, you avoid paying finance charges. If the amount you pay for an automobile is substantial, you will realize a significant amount of savings.
Free and Clear
There is no chance that your car can be repossessed when you pay cash. Repossession can be devastating to your credit report and can remain on your credit report for seven years. You could also be responsible for any remaining deficiency balance following reposession.
Value
When your car is free and clear, you can sell or trade in your car without the concern of being upside down, or owing more than the car is worth. It's more difficult to sell a car if there is a loan outstanding because you want to get enough from the sale to pay off the loan.
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