When purchasing a used car, is it better to pay in cash or get a loan to pay for it?

Although many people would consider paying in cash if possible, there are times when it is easier to finance your used car instead.1

What are some good reasons for obtaining financing instead of paying cash?

The obvious advantage of getting financing for any car is that you can spread the payments over a longer period of time.

If you are strapped for cash, this can allow you to buy the car now while paying for it in monthly installments that are easier to handle.

Having an installment loan on your credit report can help you improve your credit score.

As long as you make the payments on time, those with bad credit can overcome their credit issues within 12-18 months.

Therefore, anyone with questionable credit should always get a loan if possible.

A used car is not always an old or decrepit car. If you are buying a car today that was made in 2011, you are purchasing a car that is considered used.

This means that you may need to get a loan simply to afford the payments on a car that may still be worth quite a bit of money.

If you run a business, the monthly car payment can be used as a business expense as long as the car is being used for business purposes.

Those who choose to buy the car with cash will only get to deduct the purchase price of the car.

However, those who get a loan can also deduct the interest that is tacked on to the monthly car payment.

It can create more of a tax advantage in the future.

Why pay the full amount for the car if you aren't planning on using it until it is paid off?

For example, if you bought a car for $15,000, you would be on the hook for the full purchase price if you paid in cash.

However, if you have financing, you may be able to pay a portion of the loan before your sell it.

This can save you a lot of money if you don't like to lease cars or drive cars for more than a couple of years.

There are many great reasons why you should opt to get financing for a car regardless of how old it is.

You can spread the payment out, claim each payment as a business expense and you can possibly pay less for the car depending on how long you own it for.

In some cases, the car may be designated as used while still being relatively new. This means that you don't have a choice when it comes to paying in cash versus getting a loan.