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Cash vs. Credit For Your Car – Which Option Is Best?


Buying a car is always fun whether you are a petrol head or if you need a car for practical reasons. However, choosing the finance routes of how you will pay for your car does not need to be a headache at all. Take a look at whether you should use cash or credit:

  • Cash: The thing about cash is that it ensures that you are not in any debt. Cash will suit people who have several dependents such as children or guardian dependents that they need to take care of. The top tip to remember with cash purchases is that you should not reveal that you want to buy with cash until you sign on the dotted line. This will give you a better bargaining position if you want to haggle the price down for your car.
  • Credit: Cash loans are options for people who are thinking about buying a car but do not have all the money upfront in order to buy a car. If you are going to go down the route of credit, which also includes cash advances, be sure to choose the finance deal that gives you the best interest rate payment terms. When you are preparing to borrow to buy a car, you also need to factor in the cost of the loan when you are repaying your car loan. The cost of the loan means the annual percentage rate (APR) that will be added on top of the repayments that you need to pay every month.

Top tips

  • Depending on your budget, choose a budget car that has good fuel economy that you can reap benefits from if you are planning on using your car every day.
  • Luxury cars should be approached with caution if you will purchase them because the cost of the upkeep is high.



My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.


  1. I wrote a guest post at budgets are sexy about choosing between writing a check and paying cash or taking a 0.9% 3 year loan. I ended up taking the loan and kept the money in the bank but it takes a special type of person to keep it there. In the end do what is best for you which often means pay cash.

    • Yeah, it does take a special person to pull that off, but if you are disciplined, it could pay off. Thanks for the comment!

  2. The only time I was ever able to pay cash for a car was when I bought a used one that was about ten years old. Ironically, it lasted longer than the new car I bought with a loan before that. If you have the money to avoid taking out a loan, it probably makes more sense to pay cash – unless you need to build credit in which case a car loan will be better than a credit card (since it’s a fixed amount and can’t spiral out of control the way a credit card can).

    • Isn’t it funny how sometimes the used ones are better than the brand new ones? I definitely don’t mind buying used. Actually, I’d say I prefer it.

  3. Cars are generally so expensive that most people have to get a loan. However, unlike a loan for a house (current market aside), there is almost no chance that the car won’t be worth less after you have paid it off. And you pay for the privilege of losing value. I’d have to see the math to determine how irritating it is…

    I think that the next time I want a new car I might lease. Otherwise, I’ll pay cash for a used car.

    • Cash for a used car is the way to go for me. It’s working out great with my ’97 GMC Pickup! 🙂

  4. My views on this may be strange. If you have the money to buy the car in full, then I think its okay to finance it at ridiculously low levels. If you don’t have the cash to pay in full, you need to find a cheaper car.and begin saving until you do.

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