The Difference Between Full Payment and Installment for Car Purchase
2 Answers
The difference between full payment and installment is that full payment only requires paying the market price of the car, while installment involves paying a down payment first, followed by monthly payments for the remaining price of the vehicle and loan interest over the next 3 years. Below are the relevant conditions for installment car purchase: 1. The buyer must be at least 18 years old and a Chinese citizen with full civil capacity. 2. The buyer must have a stable job and a relatively stable income or possess easily liquidated assets to ensure timely repayment of the loan principal and interest. Easily liquidated assets generally refer to securities, gold, silver products, etc. 3. Provide a bank-approved guarantee to the bank. If the buyer's household registration is not local, they must also provide joint liability guarantees. Banks do not accept mortgages set on the purchased vehicle as collateral for the loan.
Paying for a car in full means settling the entire amount at once. The advantage is no additional interest or monthly payment worries—the car is directly yours, giving you the freedom to sell or modify it as you wish. However, the biggest issue is the large amount of cash it ties up. If your finances are already tight, sudden unemployment or unexpected expenses can be tough to handle.
On the other hand, installment payments require a down payment followed by monthly repayments. You’ll definitely end up paying more in interest, making the total cost higher in the long run. The upside is a lighter financial burden, leaving cash on hand for emergencies or investments that might yield returns.
From my personal experience, I opted for installments when I last bought a car and ended up paying nearly 20,000 extra in interest over three years. But during the pandemic, the money I saved upfront helped me get through.
The key is to assess your financial situation: if you have substantial savings and aren’t savvy with investments, paying in full saves more. If your income is stable and you’re good at managing money, installments offer more flexibility. Don’t forget to factor in vehicle depreciation—paying in full means bearing the full brunt of the car’s value drop, while installments let you spread out the cost.
