Having a car in college means three things: freedom, flexibility, and access. A car is vital for students who study part-time, those who have many activities outside campus, and those who go home regularly. But while a reliable car is worth having, getting one isn’t a straightforward process.
Getting money to buy a car can be hard, especially for a student. But it doesn’t have to be. When you know your financing options, you’ll be able to make an informed decision. Here are 3 car financing options for college students.
- Cash or Savings
Buying a car with your savings or in cash is the cheapest way to go about it. You can purchase the car fully or make a large down payment. When you pay for your car in cash, set aside a little money for emergencies. The good thing about owning your car fully is you can quickly access loans when you have an emergency by using search terms like “title loans near me.”
When paying for the car, use your credit card. Doing this helps you benefit from credit card purchase protection. It also makes the card company jointly liable for the car in case something happens to it. But depending on your card issuer, you may have to pay the remaining amount the next month. Also, not all cards come with purchase protection.
- Auto Loan
If you decide to go for this option, consider the loan amount, the annual percentage rate (APR), and the loan term. Also, avoid car loans with a prepayment penalty because refinancing your car loan or paying off the loan early can save you money.
There are two major types of auto loans: dealership financing and direct lending. With dealership financing, you get financing through the dealership. Dealerships offer multiple financing options, incentives, and even manufacturer-sponsored programs.
With direct lending, you borrow money from a credit union, a bank, or a finance company. You agree to pay the loan amount and the interest over a specific period. To get the best deal, compare the offerings of different dealerships and lenders and understand the loan specifics.
- Car Lease
Leasing a car is like renting, you return the car to the dealership when the lease term expires. The money you pay only allows you to use the vehicle for a specific period and miles. Before leasing a car, consider how often you’ll use it because you’ll get charged a per-mile fee for any extra miles–above those stipulated in your contract.
In most standard leases, the maximum annual mileage limit is 15,000. Leasees with higher credit scores get better leasing terms. It’s common for dealerships to offer leases, but you can also get one through a bank or online lender.
You may have to pay a down payment, sales tax, a security deposit, and other lease-related fees. However, the monthly payments for a lease are typically lower than for an auto loan. You can also buy the car at the end of the lease period, but you’ll have spent more money in the process.
The dealership you lease the car from will expect you to service the car according to the manufacturer’s recommendations. You’ll also have to get insurance that meets the dealership’s standards. If you end the lease earlier, you’ll pay an early termination fee.
Buying a car on cash terms is the best option, but it’s a dream for many people. Before settling on a financing method, do thorough research to ensure you get value for money.