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When to Finance an Auto Loan

Most people do not realize it, but cars are by no means an investment. The truth is quite the opposite, in fact, as cars tend to depreciate at an extremely fast rate. This is why you have to think long and hard about getting a car loan in the first place. There are simply too many factors that you need to take into consideration.

Like with most financial decisions, you have to be smart about it. After all, there is the risk of the car’s value dropping faster than your repayment rate. Needless to say, that would be a less than ideal situation as it essentially leaves you with a bigger debt and an undervalued car.

Of course, do not let this put you off the idea of taking on an auto loan entirely. The point is that there is a clear line that delineates between wise car loans and its impractical use which results in extreme amounts of debt to buy a car that is well out of your price range.

This is a pretty basic overview of when to get an auto loan. However, it should help serve as a general framework for your future loans.

About John C. Welborn