How Long Does It Take To Buy a Car? [2024 Update] | FINN (2024)

Paying cash for a car may not make sense if you want the liquidity of cash, to build credit, or to take advantage of special financing deals. Spending money also comes with an opportunity cost worth considering before you make your move.

Opportunity cost

In economics, the opportunity cost of a particular endeavor describes the alternative avenues that remain unexplored based on the final decision. In simpler terms, the opportunity cost represents what you didn’t spend your money on compared to what you did. For example, the opportunity cost of buying a car with cash could be that you aren’t able to travel on a summer trip to Europe—or any other area where you could have spent the money, such as on high-interest credit card debt.

Liquidity

Credit allows many people to purchase items or pay for services they don’t have the funds to cover. However, having cash on hand as a liquid asset can go a long way, especially if economic conditions change for the worse. When car prices are high, paying with cash can also whittle the profit margin you could earn from selling your vehicle based on the established equity. For instance, the market may support purchasing a used vehicle, like a MINI Clubman, at $15,000 now, but if the value declines to $9,000 in two years when you want to offload the car, you’ll only realize $9,000 in equity even though you paid $6,000 more.

Desire to build credit

Building credit requires taking on loans and credit and using it responsibly. If you make all your purchases in cash, the three credit bureaus (Experian, Equifax, and TransUnion) cannot track your payment history, credit mix, credit utilization, and other factors that contribute to your credit score. If you want to build or improve your credit, a car loan can help you, despite the few points you lose in applying for corresponding loan terms.

Special financing deals

New cars specifically often come with incentives like special financing deals or rebates, though the best are reserved for borrowers with the best qualifications (i.e., credit score). If you plunk down several thousand in cash for a car purchase, you could miss out on these special financing deals that may help you save money in the long run. You can often find financing deals through banks, credit unions, and alternative lenders to rival those offered by car dealers. Compare the interest you save to the savings special financing brings, and check the fine print for any prepayment penalties if you plan on paying off your loan shortly after initiating it.