Purchasing a New Car

Are you ready to make that new step into purchasing a new car? Before you make that big leap there are a few things that you need to be aware of. Before you even go and look at cars, make sure you have a clear price limit that you have in mind. Review your budget and decide on what is affordable for you.

Next step is to decide how are you going to pay for this new car? Are you going to pay cash or finance it? Right now, there are still amazing deals on financing for a new car. Let's give an example.

What would you do?
You have $20,000 in cash to spend on a new car and you also found out that you have been approved for 0% financing for 60 months.

How many of you said................use the cash and pay for the car? That way you have one less bill to pay?

In this situation paying for a car with cash when you have been approved for 0% financing is a huge financial mistake and I am going to tell you why.

When you have been approved for 0% financing, it is the same as paying for the item in cash. You will not be paying any interest on this item whatsoever. With that being said, you could take the $20K that you have in cash and invest it in something with minimial risk, something that would earn you 3% in interest. So in this case, by financing it, you are gaining 3% interest on the car by investing the money you would have used to pay for it.

Stay tuned for other car topics this week. Next time: How to negotiate for that new car with confidence.

Questions on car financing or understanding how payments work? Email me at betterbudgets@gmail.com