For years, we thought that if we bought a car with cash, we somehow got the best deal available. Many people believed in that idea and only bought a car when they could put down all the cash it took to buy it. But the fact is, buying a car for cash or financing it, can land you a great deal or cost you money in the long run. It really all depends on timing and math.
Regardless of you paying cash or financing through a credit union, bank, or one of the dealership's finance sources, the dealer will get the money for the car quickly in most cases. Flashing a blank check or a roll of cash in front of them doesn’t carry much weight with the bottom-line price of the vehicle. What matters is how you make your money, any rebates or financing promos work for you.
If you can pay cash for a new car and it doesn’t affect the bottom-line price of the vehicle, it could benefit you to take advantage of any financing specials or rebate promos. An installment loan is a loan with a set number of scheduled payments spread over a pre-defined period. When you pay off an installment loan, you’ve fulfilled your part of the loan obligation, it brings the balance to $0, and the account is closed. You could simply make a down payment, finance the rest, make a few payments and then pay off the loan. This could affect your credit score in a couple of ways, depending on you as a borrower.
If you have not established a good payment history through the credit bureaus, you will want to make some payments to establish yourself. Once you have made 3-6 months of payments, then feel free to pay off the loan While paying off an installment loan early won’t hurt your credit, keeping it open for the loan’s full term and making all the payments on time is actually viewed positively by credit bureaus and can you’re your credit score.
If you have a great credit score and payment history, you could pay off the loan right away and closeout that installment loan. This is helpful especially if you have other open active loans.
There used to be a time when paying cash upfront for a car got you a better deal, today’s market and savvy financial lenders can make it worth your while to finance. Make sure you do your math correctly and you can’t go wrong whether you finance or put down the cash for your next vehicle.
If I can help you, contact me for your next new car. I would love to work with you.