Cash or Auto Loans
According to TransUnion, delinquencies on auto loans in the U.S. in 2008 increased almost 18 percent in the last quarter of the year. Historically, there is usually an increase in delinquencies on auto loans the third quarter, but the rate has increased when compared with the same quarter in past years. Edmunds.com estimated that delinquencies in auto loans would lead to over a million and a half car repossessions in 2008. The unmade payments on auto loans are part of a similar trend in unpaid credit card and mortgage bills. In the current economic environment, some consumers must choose which bills are their priorities. For many, auto loans are paid after bills for heating, electric and mortgages. So many consumers rely on automobiles on a daily basis, that waiting to pay auto loans is not an easy decision. Public transit is not available to people in smaller cities and very few could walk or ride their bike to work. Cars are an expensive purchase, which is why many people have to take on auto loans to pay for them.
Not so long ago, people often saved up and bought a car with cash. The trend in easy financing and available credit of the past decade has made auto loans more acceptable and accessible. In many cases, someone could purchase a car with no down payment. In the wake of the credit crisis, though, lenders are tightening lending standards, requiring bigger down payments and offering fewer loans. The struggling car makers are offering some unprecedented discounts and financing offers to entice potential car buyers right now. Car buyers will need to determine if obtaining auto loans makes sense for their budgets, or if they should buy discounted models with cash.
Paying for a car with cash is the simplest option. This allows you to be debt free. If you need to sell your car at some point, you do not have to worry that you may owe more on it than you would make selling it. You do not have to send in monthly payments. The car is yours. Ideally, if you cannot pay for it in cash, you should save up until you can. If you have to take on auto loans, then know what you can afford in payments before you purchase. Do not purchase a car whose price is beyond your current financial means. Keep in mind that you will also have to pay for licensing, registration, insurance, maintenance and repairs on the car. If the car you really want is a financial stretch for you, choose something less expensive. Regardless of the amount in auto loans you can obtain, do not buy something that will put a strain on your finances. The loan and payments will be in your name. And you are the only one who knows what you can afford.
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by: laurawilder
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