The benefits of buying a car with cash. A rarely discussed dilemma is whether buying a car outright with cash or financing it through a loan is better. Like most things in life, there isn’t a one-size-fits-all answer—it depends on the individual’s circumstances and timing.
However, assuming someone is considering this dilemma because they’ve either saved up enough money to purchase a car outright or believe they can gather it, let’s explore some of the advantages of buying a vehicle with cash.
The first advantage of paying in full is avoiding debt, for instance, over the next five years. This allows for extra money each month to save.
In this context, one can also save on interest payments generated by the loan. For example, if you buy a vehicle through a loan priced at $20,000 with a $5,000 down payment at 5% interest, you’ll pay over $2,600 in interest over five years. In other words, you’re loaned $15,000 and will repay $17,600.
Moreover, such a loan will require comprehensive coverage by the lender. The consequence of this requirement is that, during the first five years, you won’t be able to opt for the minimum required insurance in Florida—PDL and PIP. Although it may seem insignificant, the average difference between comprehensive coverage and the minimum required insurance in Florida is about $1,899 annually. The average annual premium for comprehensive insurance is $3,244, while the minimum required coverage in Florida averages about $1,345 annually.
Now, it’s a matter of calculation. For a $15,000 loan, you’ll have to pay over $12,095 in interest and comprehensive insurance over five years. In other words, borrowing $15,000 will cost you $27,095.
The above numbers are merely an illustrative, non-rigorous depiction of the cost of making one decision over another. Undoubtedly, a car with comprehensive insurance will be better protected.
In conclusion, if you want fair insurance for your car tailored to your budget, call Univista Insurance. Our specialists will help you obtain the best protection for your investment. The benefits of buying a car with cash.
Give us a call today for a thorough assessment! (305) 985-4126. You can also get a free quote here.
