Buying a car is one of the biggest decisions of life for most people. In some ways it is the same as taking a student loan, gold loan, home loan or a loan for a small business. On first impression, many believe that people who do not have money take loans. But in reality even the rich also take these loans to enjoy the benefits. Due to this we must analyze the reasons for taking a loan for a car. However, these reasons change with change with every individual requirement. Many times you do not have a valid reason for taking a vehicle loan. But there are many reasons that may force you to take an auto loan. Irrespective of whether you can afford paying without taking an auto loan. Starting from economic reasons to personal reasons, the list is long. I have selected some most common reasons for buying a car with a loan.
Reasons for taking a car loan
Here is a list of reasons for taking an auto loan or car loan. Some of them may surprise you because it is not just about requirements.
1 – Social Status
Which car you own also reflects your social and economical status. Therefore, many people buy cars to show off their wealth. In many cases car buyers end up paying extra money. Due to this, they also take an auto loan to finance the car. EMI suits them better instead of buying a small car without a loan.
2 – Affordability – Buying a Car is Expensive, Everyone cannot afford it
This is the most important reason for most car purchases in the world. Saving money to buy a car takes a long time. Due to this people decide to finance a car with a bank or other money lending companies.
3 – Taking Car Loan to Improve Credit Score
Your credit score improves only when you take a credit. Taking a loan and paying EMI is good for improving credit score. Many people take this route even if they have enough money to buy a vehicle. The idea is to make a strong credit score in case for future requirements. Above all, you only need to pay token money or a down payment. This amount in many cases is smaller than buying a two wheeler with cash.
For example if the next big thing is a house and you need a loan, banks will check your credit score before approval. Interest rates are higher in case of low credit scores.
4 – Low Interest Rates is among attractive reasons for taking loan for a car
In most countries interest rates on auto loans are low. Due to this many people are able to change their vehicle easily. Additionally, the auto sector is also one of the biggest employers in the country. Low interest rates for car loans is a great way to increase sales. As a result, we also see employment growth rate going high.
5 – Keeping a car for long is not Exciting
Many people get bored soon from their vehicles. This is not linked with why we need a car. They cannot use any product for a long time. Even if they cannot afford to buy one they create some reasons for taking out a loan for a car.
6 – Passion for Cars
For many people, cars are not just a medium for going from point A to point B. They are passionate about cars. Here I am not talking about car racing drivers. Because as of now we are not talking about car racing as a career. In general there are many automobile enthusiasts who always dream about grabbing a chance to drive new cars. They keep a close eye on all new car launches and as soon as an opportunity comes, they buy that car. No matter if it comes with an auto loan.
7 – Symbol of Growth is also one of the reasons for taking loan for a car
Buying a car is linked with aspirations. Purchasing a new car works as a symbol of growth. With time your existing car grows older and your income increases. Therefore, many people upgrade from existing cars to new one. Taking an auto loan makes it more affordable early. Companies also offer car exchange offers. Therefore, many people take the route of upgrading within an existing brand.
8 – Increasing Budget for Buying a Higher Variant
Buying a higher variant is also a reason for taking out a loan for a car. Everyone has a budget, when it comes to buying a car. When they go to the showroom the top variant with all bells looks more attractive. Taking an auto loan allows them to extend their budget.
9 – Keep Money in Savings Account
If car loan interest rates are low then many people take car loans. They find it meaningful to keep their savings stored for emergencies. Instead of making payment upfront, they prefer to take an auto loan. Due to this they can use money from savings bank accounts anytime.
Availability of auto loans has made buying cars easy. Additionally, this also generates many reasons to take out a loan for buying a car. Whatever be the reason, car sales contribute a lot to a country’s economy. Therefore, pick your reason and drive out your favorite car with an auto loan. Do not forget to use an auto loan calculator from leading companies to make sure you are paying the right amount.
Why are car loans Good?
Taking out a car loan depends on your primary reasons for buying a car. Some people see this as a mode of transport and for others it is an opportunity to improve credit score. First of all, you do not need to pay a lot of money upfront. Due to this you can invest this money in a more meaningful place. Secondly, you improve your credit score via making payments on time. And last, you can buy a better car because of the low down payment and pay the rest of the money in easy installments.
You can also read our articles about reasons for loan rejection for additional information.