You’ve done all the legwork, all the research and you’ve found your perfect vehicle. Whether it’s new or used, you’ve decided and you’re ready to head down to the seller, take the keys and drive away in your new set of wheels. But how do you pay for it? What’s the best way? Well, you’ve got a few options, each with their pros and cons. Here’s a breakdown that’ll hopefully make your decision a bit easier
We break down the pros and cons of the different ways you can pay for your new car
What is it?: Pretty straightforward! Paying outright for your new/used vehicle with cash alone.
Pros: The main advantage of paying outright with cash is simply the ease it presents. Not having to worry about monthly payments means one less bill to fret over. Want to knock a few hundred (or even more) off the asking price? Sellers don’t usually turn down a reasonable cash offer. If you’ve got the dough in hand, you’ll be in for some savings.
Cons: The potentially large and immediate hit to one’s bank account can be enough of a dissuasion for some buyers. You’ll need to carefully and scrupulously save up your cash before your purchase. This takes time, discipline, and patience: things not everyone has. (Photo: Terrance Lam)
What is it?: Think of it as a rental agreement between the customer and the dealership for use of a vehicle over an agreed upon period of time.
Pros: When you’re leasing a car, the initial cost will be lower for you. You’re not paying for the full cost of the vehicle. You’re essentially renting it for a determined length of time. At the end of your leasing period, you’ll be able to move on to a fresh set of wheels if you desire, or if you’d like, most dealerships will let you buy out the vehicle too. Dealerships may be more generous with warranties as well.
Cons: Since you’re essentially renting the leased car, there will be certain conditions that you must abide by. For instance, you’ll have a restriction on the amount of miles you can put on your vehicle per year, which may prove problematic if, for instance, you have a long commute to work. If you go over the limit, you’ll have to pay off the extra kilometres. And, if you do want to buy out the car at the end of the lease, the total amount you will have spent on the car may be higher than the original cash purchase price. (Photo: Victor1558)
What is it?: Borrowing funds to buy a car and repaying via monthly instalments
Pros: When it comes to financing, you have options. You can do it through a bank, a credit union, a friend or even the dealership. If it’s impossible or impractical for you to save up for a car, this might be an option worth considering. Unlike with a lease, once you’ve finished paying all the monthly instalments, you will fully own the car.
Cons: Typically with financing, your monthly payments will be bigger than that of a lease. With your loan, there is usually interest involved as well, which means the overall final cost of the purchase will be higher than the advertised sticker price. There is also depreciation to consider. By the time you pay back your loan, the vehicle will suffer a fairly considerable loss of value, leaving the buyer paying more than the vehicle is worth. (Photo: SeedMidTN)
What is it?: Offering your old car to pay for (or partially pay for) a new car
Pros: Getting rid of your old clunker, for one. If you’ve been trying to offload a car to no avail, this is one way to do it. Another cool advantage is when you take ownership of the new car, the value of your old car is subtracted from the total price. The tax you pay will be applied to the reduced price, saving you a bit more in the end.
Cons: The value of your old vehicle is dependant on various factors, including but not limited to mileage, condition (mechanical and cosmetic), trim level and age. Though it is no doubt convenient, when you trade your car in, you will probably not be getting the best price for your old car. (Photo: Bill Selak)
What is it?: Swapping your used ride for a seller’s used ride
Pros: Ahh, the barter system. It’sjust the agreed upon items being exchanged. You’ll probably only get a chance to initiate a trade with a private seller, but this gives you more room for negotiating certain terms or conditions.
Cons: You’ll still have to pay the applicable fee that comes with transferring ownership of the vehicle to your name. You’ll also have to be extra cautious. Never make a trade for a vehicle you have not personally seen and inspected for yourself. (Photo: C.A Mullhaupt)
Volvo is among the first automakers to launch a subscription service for its vehicles, called Care by Volvo. You sign up to pay a fixed monthly fee that covers everything but gasoline (Yes! Insurance, wear and tear, tires and service, among other things) and Volvo hands you the keys to its XC40 or XC60 crossover to drive for a set term.