Used car financing is an opportunity to become a car owner as soon as possible without having to save up. Consumers have a good choice of auto loan options in the US: local banks, credit unions, or auto dealerships themselves. But how to find out if financing is the right decision, or it is better to pay in cash? This shortlist of the pros and cons will help those who can’t make the final decision. Or just jump to the car payment calculator to see the real estimation for a used car of your choice on the Indianapolis used car dealership Indy Auto Man.

Benefits of Used Car Financing

Financing is the common way to acquire a used car, and for the reason. This option brings tangible benefits, such as:

  • Car of a higher class. When paying in cash, it is impossible to exceed the budget. However, with used car financing, it is easy to get a higher quality car that’s a few years old or the one with better performance.
  • Savings are kept safe. Spending all the savings on large cash purchases is generally a bad idea – even on a car. Life happens and everyone might need a quick cash injection down the road. Car financing is a good way to keep savings intact and have money to pay for emergencies.
  • Reasonable APR. Regardless of the credit score, getting a reasonable APR on a used car is easy. Even people with bad credit can often get beneficial terms when financing a car loan because the bank can simply seize the vehicle in the event of default, greatly reducing their risk.
  • Low down payment.  Most used vehicles can be purchased with a very low down payment – usually as little as 10%-20% of the car’s value. Sometimes it is even possible to get a 0% down payment, although this results in higher overall costs for the vehicle.
  • Improved credit score. An auto loan is a chance to boost a credit score, especially if there is a need to recover from the negative impact of bankruptcy or unpaid bills.

Disadvantages of Financing a Used Car

Of course, financing has some drawbacks compared to paying in cash. Here are some of the points to complete a picture of the used car financing pros and cons.

  • Higher total cost. It’s just a fact to keep in mind. The interest paid on a loan adds up, so financing a used car almost always results in a higher total cost compared to cash purchase.
  • Higher interest rates. When comparing rates to other common loans, such as mortgages or even new car financing, used car loan rates are often higher. This directly translates into higher monthly payments for consumers.
  • Car ownership is transferred only after paying it off. Until the vehicle is paid off in full, the lender holds the title. It’s not a problem if all payments are transferred on time, but it can be attractive to pay cash and take possession of the car right away, so this is definitely a factor to consider.

What’s the Right Decision?

Financing a used car depends on the buyer’s credit, savings, financial status, income, and a host of other factors. It’s hard to say what option is the best without knowing the specifics.

However, there’s a reason car finance is so common: loans are readily available at stable interest rates, resulting in lower upfront costs. This is a real opportunity to get a great car without going bankrupt. A wise first step is getting pre-approved at several dealerships and comparing the rates using an auto loan calculator. The best USA used car dealers offer competitive loan rates for customers with good and bad credit alike.

As the car manufacturers regularly increase the prices for new vehicles, buying a used one is a good bargain. A simple way to make the right decision is to check the prices online and request a test drive.