Blog Challenge: Erin W.

To Cash? Or to Car Note?

Deciding to buy a car is usually one of the first real adult decisions you make as a Young and Freebie (Woot! Woot!). But after making that decision, adult reality really hits when you ask yourself: How will I buy it?

You have two options: 1) Pay cash, or 2) Pay with a car note.

Option 1: Paying Cash
Now, most people think that paying cash is always the best option. Which, I mean, it’s very legit. If you have it, by all means…

Of course, paying something and wiping your hands clean by not having to worry about a monthly payment seems more hassle free. Paying cash is pretty much like going to the grocery store, picking up a loaf of bread and some turkey meat, and paying the cashier, except, in car form.

But to buy a car outright more than likely means it’ll be used, because, let’s be real… if you had $30,000 to spare on a new car, you probably wouldn’t have to read this blog.

But even if you do “have it like that,” and have saved up a solid chunk of loot for a car, that doesn’t necessarily mean that you’re ready to let it all go at once. **Cue Frozen – Let It Go**

That’s where Option 2 comes in.

Option 2: Car Note
A car note is a little more complex than paying cash. To have a car note means that you took out a loan to purchase the car. Taking out a car loan is a fancy way to say that the bank is loaning you the money to help pay for the car. And I hate to break it to you friend, but they want their money back, plus some.

This means that every month, you’ll receive a bill, or car note, to pay the money back. Included in the bill is interest, which is basically a “thank you,” fee given to the bank for allowing you to borrow the money.

Here are a few questions you should ask yourself if you’re wondering if a car note is the best route for you:

  1. Do you make consistent money to afford a monthly bill?
    If you’ve saved up $5,000 for a car over the years, but don’t have a job yet, this may not be the best option for you. Paying cash for a car will prevent a monthly bill (excluding gas and repairs).
  2. Do you want a brand new car?
    AKA, new car smell is a must!
  3. Is the interest rate low?
    Interest rates vary, but make sure you’re getting the lowest possible.
  4. Do you have good credit?
    Bad credit = no loan… or a very sucky interest rate.

When it comes to taking out a loan, make sure you ask yourself these questions. Basically, you want the best car for your money. If you’ve saved up $10,000 for a car, taking this option means that you may put forth a large down payment, or initial payment, to reduce the monthly car note. Or, you can pay cash and not have to worry about a bill at all.

Follow us on social media for more money tips and tricks!
@YoungFreeMI

Be Easy,
Erin