Is it Sensible to Borrow Money to Buy a Car?

If you are looking for a new car then you may feel that you need a loan to get it. This is because cars tend to be expensive. Although you can buy very cheap cars, they tend to normally not be in very good condition and unless you are confident that you could get them working well yourself, perhaps if you have skills as a mechanic, then it is best to try to pay more and get one that offers better value for money. Of course, you will always take a risk when buying a car as you will not know for sure whether it will be good or not. Buying brand new is less risky because it has not been used by anyone else so cannot have been mistreated and it will probably come with a warranty against manufacturers faults. Buying second hand is a far cheaper option and one that many people choose to do. This is trickier as the car has had previous owners and therefore may not have been looked after well. However, if you buy from a dealer they will have serviced it and might give you some sort of guarantee on it. Buying from an individual is much riskier, especially if you know very little about cars and how to check them to see if they look like they will be good value for money. This tends to be a cheaper way to buy a car, however, it can be risky. Therefore, if you want to get better value for money when you buy a car you will normally have to pay more and this will increase your chances of needing a loan. However, getting a loan will not be the right thing for everyone. It is important to make sure that you will be able to cope by asking yourself a few questions.

  • Will I be able to cope with the repayments – it is really important to find out what the repayments on the loan will be and to calculate whether this is something that you can afford each month. Note how many repayments you will need to make and therefore how long the loan will continue for as you will need to make sure that you can continue to repay the loan for the full term. Think about your finances and whether you will be able to manage or whether you will struggle. You might be able to find ways that will make it easier for you to manage but it is really important that you have a plan in place and feel really confident that you will be able to get things to work, before you take on the loan. Sit down and look at the figures. It is easy to make a guess and convince yourself that it is safe to get the loan, but it is much better to make sure that you actually do the calculations.
  • Will buying a car with a loan mean I get one that is better value for money – it is also worth making sure that you really will be getting a car that is better value for money if you take a loan. Some models of car are dearer than others anyway and you might be tempted to buy a more expensive model which is just as dilapidated as the cheaper model that you could afford without a loan. If you do this then you will not be getting good value for money. It will much better to pay more for the model you were considering to get a younger car with a lower mileage that is in a better state of repair than going for a trendier car that will be no less prone to breaking down than one you can afford without a loan.

It is really important to make sure that you can make the right decision. Getting a loan is a really big step and you need to make sure that you are getting it for the right purpose. If it so that you can buy a car that will give you good value for money then this is a good reason. However, if it is to buy a car tat you will like better then this is not a good reason. You also need to think about whether you can afford the repayments on the loan as if you cannot then you need to think twice about getting one at all. It may be better to just avoid the loan if you feel there is any risk that you will not be able to repay it. Alternatively, you could come up with some sort of plan as to how you will be able to cope financially so that the loan is a lot less risky. This could include plans on how to reduce your spending as well as how to increase your income.