Tuesday, October 23, 2012

Car Can Be Bought Through Cash or Finance

The question normally we face is how to purchase a car - should we take a loan or purchase it outright by cash? We all face this dilemma, whether to buy in cash or on credit especially when we want to buy car as it is an expensive item. There are pros and cons of both. Obviously, car finance option looks good on the pocket as we need to only pay monthly installments towards the car price. However, the monthly rate of interest of car loan depends on the amount of loan taken, tenure and the loan servicing terms; no two car finance loans are similar.

Well, if you have deep pockets then outright buying is perhaps the best option. You pay by cheque, take the keys and drive away. No more hassles of paying monthly installments and tension. The biggest advantage of outright purchase is there are no liabilities and one can sell the car anytime they wish.

However, many people, especially business persons prefer to avail car finance even when they are able to pay right away. Their reasoning is that the car can be reflected as an asset in their books and so they can claim depreciation at the end of the financial year. Moreover, they can claim expenses such as fuel, repairs and maintenance. If these factors are to be considered, it’s better to opt for car finance over outright purchase.

Arranging car finance is easy. Most probably, your car dealer will have tie-ups with finance institutions or banks. Otherwise, you can rope in your bank or financier. Car finance requires a minimum of paperwork. Financiers usually collect signed post-dated cheques towards loans.

The flipside of car finance is the penalties you have to incur in case you fail in servicing the loan. This could wipe out your credit history and you won’t be able to get further loans. As a responsible citizen and diligent person, you wouldn’t like to fall into a debt trap so take loans only if you are able to service them.

As a leading dealer of Ford cars, Cumberland Ford can facilitate ford finance on all kinds of Fords, including Territory and Falcon, two of the biggest selling cars in Australia.

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