First and foremost, avoiding any type of interest-bearing debt is a big money saver for any consumer. By paying cash for a car, the driver avoids paying interest over the entire time period that he owns the car.
Significance
If a borrower buys a $10,000 car with a 5% loan and a 5-year term, he pays $1,322.74 in interest over the life of the loan.
Function
Paying cash for a car may make the deal even better for the consumer. If a consumer pays cash for a car, the seller may be willing to negotiate a lower price, eager to get all of the money up-front.
Time Frame
Paying cash for a car can save you money when it's time to sell. Cars are a depreciating asset and if you have to sell a car for less than you owe on it, you are liable for the remaining debt.
Considerations
Saving up for a car can take time, but it is worth it in the long run.
Misconceptions
Paying cash for a car does not mean that an individual does not have good credit. It simply means that he is able to save up for what he wants to buy.
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