If you are in need of a new car and you’re debating whether to use a loan or pay cash, you should consider your attitude toward debt and your financial circumstances and ask yourself the following questions:
- Have you saved up the cash? If you haven’t, can you wait until you have the money to buy a car, or do you need a car right away?
- If you have cash, is buying a car (a depreciating asset) the best use of your money? Or might it be better to get a car loan and use the cash for, say, a home remodel that would increase your home’s value?
- How much debt do you have already? Can you afford to add a car payment to your pile of monthly bills?
- Do you have a good credit rating? It could help you improve your credit, or if you’re young, establish good credit, to get a loan and show a track record of making on-time loan payments.