Why you should get a car loan when purchasing your first car

This is sponsored content for Jacaranda Finance.

Are you wondering whether it's a good idea to get a car loan? Well, as a beginner, you might get confused by the varying recommendations you find online. Every person has their own experience with auto loan, therefore, there's no right or wrong way to do it, especially if you're just getting your first car.

There are a number of different ways that you can finance your car, including personal contract purchase (PCP), personal loan, especially cheap car loans, leasing, or hire purchase (HP). Of course, each one of them has advantages and disadvantages, depending on the total cost you wish to spend. So, why is this a better method of acquiring your first motor vehicle rather than paying everything with your cash?

1. Improves credit score

Bad credit doesn't automatically mean that you have low income, but being on that end of the income spectrum increases your chances of having bad credit. As such, buying your dream car might seem like an unachievable objective, given that you can hardly get a loan to finance this purchase. Fortunately, there are a number of bad credit car loans that you can try out regardless of your score.

As a first-time car buyer, bad credit auto financing will not only help you achieve your dreams, but also improve your credit status. How does it do that? Well, these scores are usually generated based on how you repay your current loans and whether you have any overdue credits. Finding the right car loan will set you up for any future projects. Even people with good credit status can take advantage of this and improve their score even further.

2. Financial stability

Although it's not always the case, most people buy their first car in the early stages of personal financial growth. At this point, they can afford to buy a car, but this will drain a big percentage of their savings. If you're in such a situation, the best option will be to finance your car. This way, the cost will be shared across several months, hence reducing the weight.

At the end of the day, you'll have your fully-serviced vehicle and still be able to pay all the bills. Buying your first car on cash might disrupt your normal routine. If you have a family, this could have a serious impact on their lives, especially when you're the breadwinner.

3. Get a better car

Of course, it's nearly impractical to get a luxurious car after your first salary, unless you're incredibly lucky. You'll spend a fortune to get such a vehicle, not to mention the cost of maintenance that comes with it. As such, you'll need to have enough balance in your bank account to accommodate all the needs. No matter how well you plan, dealing with all these expenses can be quite tough.

For this reason, many people usually opt for a low-maintenance vehicle as their first car. However, if you're adamant about getting a better car at this stage, then auto financing is the way to go. With this technique, you'll be able to get a car of your choice, while not breaking the bank. However, this freedom of choice shouldn't tempt you to go beyond your limits.

What to keep in mind

It's worth noting that this isn't a perfect method of getting a car; it definitely isn't the easiest way out either. If you don't plan well, you could fall into a huge financial trouble that might prove quite costly in the long run. As a matter of fact, there are cases of people who stopped paying their bills in a bid to service their car loans. Therefore, as you apply for a car loan, make sure that whichever amount you choose to borrow is within your limits. Don't sign a deal that you can't afford as it might mess up your future.

Final thoughts

Auto financing is a fantastic way of buying your car of choice when you don't have enough money to cover the purchase. Although people have varying opinions on whether or not car loans are beneficial, these can always be a great option for those planning to own their first car. For one, it eases the financial pressure that one might feel if they're to use their cash to complete the purchase.

Auto loans also help build one's credit score if they service the credit within the required time frame. However, if you decide to use this method, make sure you pay a good percentage upfront to avoid repaying more than the actual cost of the car.

This is sponsored content for Jacaranda Finance.