Which Option is Better: Cash or Auto Loans for Bad Credit Buyers?

Buying a new car is always exciting, but there is always one question everyone should ask themselves: do I get a car loan or should I pay cash? Approximately 84.5% of car shoppers now purchase their cars using auto loans, but if you’ve got bad credit you may have reservations about borrowing. You may be unsure if a car loan is even an option for you.

Luckily, there are now car dealers who specialize in offering auto loans for bad credit buyers. So, no option is off limits for you. But how do you decide whether cash or credit is the road you should choose?

cash or auto loans

When is Cash a Good Idea?

Paying cash for your next car can sometimes be a great idea if you have the cash to spare for a new car without completely depleting your savings. However, many people with bad credit are going to struggle to find the cash for a new car.

If paying for a new car with cash, however, know that draining your resources for such a purchase may preclude you from replacing your new car should your insurance fail to cover damages or loss in an accident. Make sure you have coverage for repairs, replacement or a rental so that you can keep going to work and earning a paycheck.

An Auto Loan Could be Better

Car loans aren’t off limits to those with bad credit. Even with a poor credit history, there will be many options available to you. Proving you can handle car loan payments may also boost your credit score by demonstrating that you are a reliable and trustworthy person.

Rather than deplete your savings, a car loan allows you to save your the balance of your cash for other important concerns, all while still making your car payments. You can also add optional insurance to your car loan. In the event of an accident, such insurance will prevent delinquency of payments should you become injured or otherwise predisposed, at least until you are able to get back to work.

When you’re looking at buying a new car, you should consider your financial options carefully because there are distinct benefits between paying in cash and acquiring a loan. If you do shoulder a poor credit history, then find car dealers for bad credit. They will be able to help you get your new car while helping you to reestablish your credit in the future.

Sources:

Consumers Rely on Car Financing More Than Ever, ConsumerReports.org
Buying a Car: Should You Pay Cash or Get a Loan, MomandDadMoney.com

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