Thinking about getting a new set of wheels?
One of the biggest financial decisions you’ll face is whether to pay upfront or take out a loan. Both options have their perks and pitfalls, so let’s break it down in plain Kiwi terms to help you make a smart choice.
Buying A Car Outright
Buying a car outright means you avoid interest payments, loan fees, and debt obligations. You own the car from day one, which gives you financial freedom and peace of mind, knowing you won’t face repossession if money gets tight. However, it requires a large upfront payment, which can tie up cash that could be used elsewhere, like investments, savings, or travel. Plus, your budget is limited to what you can afford in cash, which might mean settling for an older model.
Financing A Car
On the other hand, financing a car allows you to spread the cost over time, making it more affordable upfront. It gives you access to a better or newer vehicle without draining your bank account, and regular repayments can help build your credit score. Keeping your savings intact means you have more financial flexibility. However, loans come with interest and fees, increasing the overall cost of the car. Monthly repayments are a long-term commitment, and if the car depreciates faster than you pay it off, you could end up owing more than it’s worth.
Whats Right For You?
The right choice depends on your financial situation and priorities. If you have solid savings and want to avoid debt, buying outright could be a smart move. If you’d rather keep your cash free for other expenses, financing may be a better option. A hybrid approach—making a larger down payment to reduce the loan size—can offer the best of both worlds. Before making a decision, crunch the numbers, review your budget, and explore financing options to ensure you’re making a move that suits your wallet and lifestyle.
