![]() Lenders are taking more risks when a borrower doesn't put a down payment. Down payment - you may need a sizable down payment.You may lose the car - if you failed to make payments or default on the car loan, the lender will take away your car.If the interest rate is high, then you may end up paying thousands in interest payments. You need to repay the loan plus interest. Interest payments - the bank or lender doesn't give you the money for free.Missing payments could ruin your credit score and the car. Depending on the term, you may have to make payments for 3 to 5 years. Monthly payments - you will have a monthly payment to make.This allows you to leverage the bank without putting up all your money upfront. Lower interest rate - if you have a good credit score, the interest that you are getting will be competitive.Buy a car you like - if the vehicle that you like to buy is out of your budget, financing gives you the option to buy a car that you like.However, if you default on the loan or make late payments, it would destroy your credit score. Improve credit score - having a loan balance improves your credit score. ![]() With financing, you own the car after the term is over. They have to return the car to the dealer after the payment is completed. Leasing is like renting where the buyers do not build equity on their car.
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