It is fairly common knowledge that a car is a depreciating asset. For this reason, some car shoppers opt to avoid financing vehicles and paying significantly more for them by the time loans are paid in full. However, paying cash for a vehicle is sometimes not possible, especially for late or new models, which can come with prices in the $20,000-or-more range. Financing, therefore, is a must for cash-strapped shoppers and can come with advantages.
Little or No Down Payment Programs
Securing a car loan is a way to own a car without investing large amounts of cash, especially for those on a budget. Many car loans are available with attractive interest rates and little or no down payment requirements. For those who have little or no savings, it becomes possible to build cash reserves while making affordable monthly car payments.
Low Interest Rates
Especially during times when dealers need to move inventory, interest rates on vehicle loans can be as low as zero percent. For this reason, it is often better to keep cash reserves in an interest-bearing savings account rather than tie it up to finance a depreciating asset like a car.
Tax Advantages
The Internal Revenue Service allows income tax filers deductions for expenses and vehicle usage on cars used for business. Some leases and loan interest can also be tax deductible. This often means that a portion of monthly payments can be returned in the forms of tax refunds, which can be used to reduce loan amounts or be invested elsewhere.
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