How do international students get a loan to buy a car in the U.S.? (1)
How do I decide whether to take out a loan to buy a car?
First, let's look at the benefits of paying full price for a car.
1. Full payment without interest.
A car is a consumable. The more you use it, the longer it lasts, and the more it depreciates in value. In modern society, especially in the United States, cars have become so relevant to people's lives that in most cities in the U.S., not having a car means not having legs.
Whether you buy a car with a loan or with full payment, the value of the car depreciates over the course of its use, but you have to bear the additional pressure of interest. If you encounter financial problems and are unable to repay the loan, being late for more than 15 days constitutes a default, which not only results in penalty fees, but also has a significant negative impact on your future purchases of homes, cars, and all other credit-related activities in the U.S. and China. If it is more than 90 days late, the bank or dealer will forcibly take possession of the car, and the lender will be responsible for the additional collection costs in addition to the principal and interest and late fees caused by the late payment. You don't need to worry about it if you buy the car with full payment.
2. Absolute control over the vehicle
Compared to buying a car with a loan, when you buy a car with full payment you own the car outright, not only escaping the risk of paying off the loan, but also being able to sell the car whenever you need the cash.
You can also resell the car you bought with a loan, but you must pay off the loan before you can sell it. With the exception of zero percent loans, which are very rare, early repayment of the loan is higher than the original purchase price of the car. Of course, if you take out a loan with a low interest rate, the interest paid back can be negligible, taking into account the annual inflation rate and the bank's deposit rate.
All in all, buying a car with full payment eliminates all the worries about paying off the loan. There is no monthly interest and no lender to deal with. Buying a car in cash is quick and easy, just write a check, and the car is yours. The biggest drawback to buying a car all in cash is that you have to have enough cash, which may reduce your quality of life after you buy the car. For many people, after all, buying a car is a huge expense, and not everyone has a lot of cash in their account.
Of course, from a financial point of view, if you choose to take out a loan to buy a car, you will have more money in the bank than if you buy the car with cash, keep it in the bank or invest in some low-risk government bonds, and reap 1%-3% interest per year, which is equal to the interest you would have paid on the loan you took out to buy the car, plus the effect of inflation, which will devalue the debt in the future (e.g., 5%). (Paying off $100 of debt years from now is a better deal than paying off $100 of debt today because $100 today is worth more than $100 five years from now. So, in that sense, taking out a loan to buy a car can also be a cost-effective option.
So, under what circumstances is a car loan a better choice?
The first prerequisite for taking out a car loan is to have a stable source of funds to repay the loan. After the down payment is made, you should ideally have enough money in your account to cover your expenses for three to six months. This money will help you pay off the interest, possibly pay off the loan early, and protect you from credit crises.
1) If you are good at investing, you may choose to buy a car with a loan to free up your investment funds.
If you are good at investing, you can use the money you have left over from the down payment to invest in something with a long-term rate of return to pay the interest on your car loan. 2.
2) If you want to buy a luxury car, but have limited cash on hand, you can take out a loan to buy a car.
If you want to buy a luxury car but have limited cash on hand, you can take out a loan to buy a car with a wider range of choices than buying a car with full payment. If you want to buy a luxury car but have a limited cash budget, as long as you can guarantee the repayment on time, it is easier for you to buy the car of your dreams with an installment loan. 3.
3) If you want to stay in the U.S. for a long period of time or have an urgent need for credit accumulation
The U.S. is a credit society, and credit scores are affected by getting credit cards, renting apartments, etc. Planned credit spending is a very effective way to improve your credit score. If you plan to develop in the U.S. after graduation or need to build up your credit urgently, buying a car with credit is the best choice for you.