Are you ready to buy your next car? You might have it all picked out, the perfect colour, all the gadgets you want, and a model you love, however there’s one final step that you need to figure out: how are you going to pay for it? It’s a more complicated question than you might think because there are several ways of paying for a car and they all have advantages and disadvantages. Let’s figure out the best way to buy a new car for you.
Method 1 – Cash
Let’s start with the most obvious method but also the most uncommon method, buying the car outright with a big pile of cash. Economically this is actually the most efficient way to buy anything, not just cars, however with cars in particular dealerships will often offer a cash discount since they also like it when cars are bought outright as they make all of their profit at once and don’t have to split it with a lender, which goes for you as well, if you buy a car with cash then you own it as soon as you drive it off the lot.
The reason this is the most uncommon way of buying a car is that very few people have $20,000 to $40,000 available to spend at once, which means that even though this might just be the best way to buy a new car in a perfect world, it’s also the most unrealistic.
Method 2 – Financing
The most common method of buying a car is financing, where you enter an agreement and agree to pay off the car’s value plus interest in monthly instalments over a set period of time. This is more expensive than paying with cash because of interest, which is an added amount that’s put on top of the loan. It also means that you don’t have full ownership of the car until the loan is fully paid off, which means if you ever want to change or get rid of the car you need to pay off the entirety of the remaining loan first.
However the upside is that you can start driving the car without having to spend years saving up the money, which is a massive positive all things considered.
Method 3 – Leasing
The final method to consider is a bit of a wild card, a lease can be seen as more of an extended rental, where you pay a monthly fee to drive the car and at the end of the period you have the option of buying the car outright. It’s much more limiting than just buying the car as you’ll have to stick to things like mileage limits however the monthly payments will be much cheaper than financing and you’ll likely get an even fancier car.
As you can see, there is no single best way to buy a new car in Canada, although financing is definitely the most common and in an idea world, buying a car with cash would be the way to go. But it’s really dependant on your needs, wants, and overall financial situation!
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