What Are The Benefits Of A Car Loan
Your financial goals are usually the driving force behind choosing to lease, finance, or fully purchase a vehicle. There is no right or wrong choice, all that matters is what’s right for you, right now.
In 2020, about 85% of new cars were financed through a car loan, making it the most popular method of purchasing a new vehicle. That’s why this article focuses on the benefits of a car loan.
WHAT IS FINANCING?
Financing is borrowing money to buy a vehicle. Your payments are usually directed towards a lending company, not the auto dealer. This is because the financier buys your vehicle for you and permits you to pay them back, making money from the interest payments. After the payments are made, you own your vehicle outright.
HOW IS FINANCING DIFFERENT FROM LEASING
Leasing can be compared to renting a car. The dealer remains the owner of the vehicle but allows you to drive it for a monthly fee. When the lease is up (usually 1-5 years), you return the vehicle and stop making payments. You do not own the vehicle like you would if you financed it with a car loan.
BENEFITS OF A CAR LOAN
- LONG-TERM PLANNING: Over the course of several years, the long-term game has always favoured financing. Your payments may be slightly higher than leasing, but in the end, you get to keep your car. Over the course of a decade, for example, you’ll probably make payments for the first five years, at which point you’ll own the car; simply paying for gas, insurance and maintenance after that. Whereas if you leased vehicles over the course of the decade, you’ll get to drive four or five new vehicles, but you’ll be making monthly payments for all ten years.
- NO RESTRICTIONS: Since you own the vehicle there are no restrictions on how you customize it. You can add fancy rims, bigger tires, paint a lightning bolt down the side. It’s up to you, because it’s your vehicle.
- LESS STRESS: Drivers of leased cars often feel stressed about maintaining the vehicle. You might see them parking at the back of a parking lot, as far away from the grocery store as possible to avoid dings or scratches from carts or other cars.
- SAVE ON INSURANCE: Car insurance is more expensive for people who lease their vehicles. This is because you pay a higher rate for a new vehicle. For example, if you wanted to lease or finance the 2021 Chrysler Grand Caravan today, you would pay the same in insurance either way. However, if you leased the Grand Caravan for two years, and then in 2023 leased a new Jeep Cherokee Tailhawk, your insurance would likely increase to cover the cost of it being a new vehicle This continues for as long as you keep driving brand new vehicles but wouldn’t happen if you kept driving the original Pacifica.
- EARLY LOAN TERMINATION: Many financing organizations allow you to pay off the full remaining value without extra fees or penalties. This can save you even more from eliminating the interest you were paying.
- MORE PURCHASING POWER: This is perhaps one of the best perks of choosing to finance your car with a car loan. For the most part, dealerships only lease new vehicles. Financing allows you to explore used options, which for many makes even more financial
LEASING OR FINANCING, WHICH IS RIGHT FOR YOU?
If you’re still undecided, then we’d like to suggest contacting Brantford Chrysler’s Finance Department. Speaking with a finance professional can help you see what options are available to you, including the rates.