Shakespeare Was Wrong: 4 Reasons to Finance Your Car

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You always want to be responsible with your money—that's why you follow Polonius's advice, "Neither a borrower nor a lender be," and buy everything in cash.

Well, Polonius was a dummy who got stabbed through a curtain by a deranged Hamlet. Don't follow that guy's life choices. Using credit responsibly is much more beneficial in the long run than avoiding it.

Let's say you want to buy one of the cheaper vehicles in our new inventory, the Dodge Dart SXT, and you have $20,000 in your bank account. Since the MSRP is over $21,000, you'll have to try to talk us into lowering the price to meet your cash offer if you want to avoid taking out a loan. Paying cash limits your choices.

More importantly, if you succeed in getting the Dart for $20,000, your bank account is now empty. Should any emergency expenses come up, you'll be out of luck with your last penny invested in a car.

If you decide to finance instead, using $5,000 for a down payment, you can afford higher trim levels and more expensive models—you are no longer confined by the exact amount in your bank. But for simplicity, let's say you get the same deal: $20,000 for the car. There is still $15,000 in your bank.

With interest on monthly payments, you may wind up paying a few hundred dollars more over the term of the loan, but you also have $15,000 that you can now invest and make some of that difference back.

Finally, paying for a car in cash does not hurt your credit score, but it also doesn't build your credit score. Even if you can afford to pay cash for a car, you may one day want a house—and chances are you will need a mortgage. Building your credit now can make a big difference in your future.

Categories: Finance
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