What is the difference between buying a car with a loan and paying in full?
2 Answers
The differences between buying a car with a loan and paying in full are as follows: 1. Different handling fees: When manufacturers do not offer zero-interest financial policies, consumers need to bear two additional costs: loan interest and handling fees (commonly existing); paying in full during the car purchase process does not include this handling fee. 2. Different purchase times: Buying a car with a loan allows many people who are confident about their future income to consume in advance and purchase a car, which can significantly increase car sales; many people cannot afford to pay a large sum of money at once to buy a car and need some time to save. 3. Different fees: Paying in full does not require a mortgage, but you must pay: purchase tax, license plate fee, compulsory insurance, and vehicle and vessel tax, while insurance is optional for the car owner. Buying a car with a loan requires full insurance, as required by banks nationwide. Because the car's ownership does not belong to the owner during the loan period, the owner uses the car as collateral. During the loan period, the ownership certificate, purchase invoice, and full insurance policy must be deposited with the bank. The mortgage is released only after the loan is fully repaid. 4. Different interest: Before the loan is repaid, it takes 1-3 years, and interest must be paid during the loan period; the process of paying in full is much simpler than buying with a loan, saving a lot of time and effort, and there is no need to pay financial service fees or loan handling fees. 5. Different insurance costs: Many 4S stores have long-term cooperative relationships with insurance companies. Usually, when buying a car with a loan, the 4S store will require customers to purchase full insurance in the store, but not all insurance is suitable for everyone, so it is relatively not cost-effective. 6. Different maintenance fees: If you buy a car with a loan at a certain 4S store, subsequent maintenance and other fees are basically tied to the 4S store, which can then earn maintenance fees; when paying in full, the first maintenance is usually done at the 4S store, and subsequent maintenance can be freely chosen by the car owner.
As someone who often discusses cars with friends, I feel there's a significant difference between buying a car with a loan versus paying in full. With a loan, you make monthly installment payments, which means you don't need a large sum of cash upfront—this is great for young people like me with tight budgets. However, the interest on the loan can add up, and the total cost of the car may end up being much higher. For example, a car priced at 100,000 yuan could easily cost you 120,000 yuan after a few years of loan payments. Additionally, the bank or auto loan company might require collateral, and the car won’t fully belong to you until the debt is paid off. On the plus side, it helps build your credit score, making it easier to buy a house in the future. Paying in full is the opposite—you hand over the entire amount at once, and the car is immediately yours, with no worries about debt or interest losses. The downside is that you need to save up a large sum of money, which might be tough if funds are tight, potentially delaying other expenses like travel or investments. In terms of flexibility, monthly loan payments are smaller and less stressful, while paying in full saves money but carries cash flow risks. My advice to young friends is to carefully consider the annual interest rate and monthly payment affordability when making a choice.
