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expenses. And remember that there are additional costs to car owner- ship, like insurance, gas, and upkeep.
Pay out-of-pocket: Paying out-of-pocket is almost always less expen- sive than financing the purchase. Unless you can invest your money at a rate that is higher than the car loan
rate, you would be better off paying in
cash. But be careful. Leaving yourself unprotected in the event that you need emergency funds would be far more financially damaging than taking out a loan for the car.
Down payment: It makes sense to pay as large a down payment as you can afford. Doing so reduces the amount of money you must borrow to pay for your vehicle, and therefore lowers its total cost. You’ll experience the rewards in lower monthly payments.
Most experts recommend at least a 20% down payment. This amount will most likely keep you from ever owing more than the car is worth. In fact, many lenders require this amount to approve an auto loan.
“Pay as You Go” Is Worth the Effort
Some purchases are worth waiting and saving for, especially as you are trying to get out of debt. While it’s human nature to want more of the nice things right now vs. down the road, your discipline in sticking to a budget and learning to put money away in savings for emergencies and future major purchases will enable to you realize those objectives in due time. If an individual or family can’t afford to save in order to pay cash for an item, they certainly can’t afford to buy on credit.
How to Budget for a Major Purchase 59