5 reasons why applying for car finance is a good option for car buyers

When it comes to buying a car, people are always conflicted about whether it’s best to opt for car finance vs buying outright. While both have their pros and cons, it’s always best to understand what they are and what works well for your finances and lifestyle. 

Since you are reading this article, you want to know if car finance is worth it and how you can benefit. But, before we go into the reasons why, let’s briefly explain what car finance is. 

Vehicle finance is a loan agreement that varies between a 12 to 72 month repayment period. Lenders have various offers within this loan agreement that can make managing your payments easier, like balloon payments and the option to pay off a deposit to help alleviate the loan amount. With car finance, you aren’t restricted to one place to purchase your vehicle. You can buy your car from a private seller, car dealership, or an auction house, whichever suits you best. Now that you understand what vehicle financing entails, let us explore why it is a good idea to get a car on finance. 

Build a good credit score 

When it comes to buying a car, the thought of improving your credit score isn’t considered as much. But, vehicle finance is an effective way to build and improve your credit score over time. Depending on your term loan and how well you keep to your agreement each month, you can build an impressive credit score that can help you in the long run, should you decide to get a home loan, apply for a flat to rent, business loan or a personal loan. Your proof of payments over the years will show lenders the type of payer you are and how reliable you are, which is fundamental in the world of credit. Having a good credit score is an effective way to build assets over time and improve your finances. When getting vehicle financing, you get to do both – get the vehicle you need while also building a better financial future for yourself. 

Get the car of your dreams

It’s impossible to overlook one of the biggest benefits that come with vehicle finance. You get to own the vehicle of your dreams. The vehicle you had longed for from when it first entered the market or when you were younger. It is no secret that vehicles are costly and require thousands of Rands, which most South Africans don’t have at their disposal. Saving up for it can take years, and considering how uncertain life can get, you may not be able to reach your saving goals in the time frame that you had envisioned for yourself. Instead of having to spend years on saving, you can apply for car finance and get the vehicle you want. If your dream car is too costly and you don’t want to owe that much money, you can save at least 20 to 30 per cent of the overall cost. That way, you get a smaller loan amount, and you can settle the balance much faster. With financing, you don’t have to do it all on your own; you can get assistance to help you get what you need. 

No hidden costs 

When you pay or save up for a purchase, particularly one that is expensive, you always need to consider the additional cost that may pop up. You need to save a little more money so that you are on the safe side of things. This can become challenging when it comes to saving for a bigger purchase as that may take longer to achieve. But, with car financing, you won’t have to worry about any hidden fees or costs. When you apply for your loan and get pre-selected and go over the contract, everything is put into writing, so you know exactly what you will be paying for, how much, and for how long. This transparency can help you budget accordingly and give you peace of mind while you enjoy your new set of wheels. 

More options 

Options allow you to choose things that truly matter to you and bring you joy. You don’t have to go for something that you don’t like because of the cost, but you can choose what you like while also staying within your budget. Whether you have been interested in a brand new vehicle, a second-hand car or a sleek sports car, you have the option of financing that car and getting the vehicle you want. You can rest assured that you are making monthly payments on a car that brings you joy and is of good quality, and can last you for many years, which is what everyone wants. Vehicles are a depreciating asset; however, when you purchase a reliable model in good condition, you can stay with that vehicle for five or more years until you decide you would like to change it. 

More savings

Life is unpredictable, and it is always best to stay prepared. Keeping money aside for rainy days, retirement or medical emergencies can make a difference and help simplify your life. With the cost of living in South Africa continuing to soar, many South Africans will struggle to save substantially while also saving for a large purchase such as a vehicle. To be on the safe side, entering a vehicle finance agreement allows you to use your savings for something else or keep saving and allowing your money to mature over time. This is an effective way of ensuring that you work your way towards financial freedom where you always have a buffer for challenging times. This is also beneficial if you are a breadwinner or have family members depending on you as you know that you have some money stacked away for any emergencies. This will help you avoid using a credit card for any emergency that may come your way and potentially creating a bad credit rating or credit history for yourself in the future should you go over your head. Apart from keeping your savings for emergencies, you can also use them to improve your quality of life, such as starting a new business, going on a vacation, or working on improving your home. There are so many things you can do with your savings while also ensuring you have a vehicle of your own.  

Final thoughts 

The car-buying journey can be long, exhausting and confusing. Not only must you find the right vehicle for you and your needs, but you must also find the right way to pay for it. While some may prefer to opt for cash or a personal loan, it is safe to say that there are more benefits of car finance over a personal loan. With a personal loan, you will pay more interest which doesn’t help you save money in the long run. With cash payments, you use all your disposable income and money saved up to cover one expense which leaves you in a terrible financial position if you don’t have any additional savings that you may need in the future. We hope that these five reasons helped you make a better and more suitable choice for yourself and your finances.