Is Car Finance Worth It? A Closer Look at the Pros and Cons

Car finance has become an increasingly popular option for individuals looking to purchase a new or used vehicle. With the rising costs of cars and the limited availability of cash on hand, many people are turning to finance options to help them afford their dream car. However, is car finance really worth it? In this article, we will take a closer look at the pros and cons of car finance to help you make an informed decision.

Pros of Car Finance

Affordable Monthly Payments

One of the biggest advantages of car finance is the ability to afford higher-priced vehicles by breaking down the cost into monthly payments. Instead of paying a lump sum upfront, you can choose a finance plan that suits your budget and make regular payments over a set period of time, usually ranging from 12 to 60 months. This allows you to drive a better car than you would typically be able to afford if you were to pay in cash.


Car finance offers flexibility in terms of repayment options. You can choose a plan that aligns with your financial situation and goals. Whether you prefer a shorter term with higher monthly payments or a longer term with lower monthly payments, there are various options available to suit your needs. This flexibility allows you to customize your repayment schedule based on your income and other financial obligations.

Access to Newer Vehicles

With car finance, you have the opportunity to drive a brand new vehicle without having to save up a significant amount of money. Many finance deals are offered for new cars, allowing you to enjoy all the latest features, technology, and safety advancements. This is especially appealing for those who value having the newest and most up-to-date vehicle models.

Build Credit

Car finance can also help you build or improve your credit score. Making regular payments on time shows lenders and credit agencies that you are a responsible borrower. Over time, this can positively influence your credit score, making it easier for you to obtain future loans or credit in other areas of your life.

Peace of Mind

When you finance a car, you have the peace of mind that comes with knowing that you have a reliable form of transportation. Unlike buying a used car outright, which may come with hidden issues or expenses, financing allows you to purchase a vehicle that typically comes with a warranty. This can provide additional protection and save you from unexpected repair costs.

Cons of Car Finance

Interest Charges

One of the biggest drawbacks of car finance is the cost of borrowing money. Banks and lenders charge interest on the loan, which means that you will end up paying more for the car in the long run. The interest rate you receive will depend on various factors such as your credit score, the length of the loan term, and the type of vehicle you are purchasing. It is essential to carefully consider the interest charges and calculate the total cost of the loan before committing to car finance.


Cars are not investments in the traditional sense. They depreciate over time, which means that their value decreases as they get older. When you finance a car, you are essentially borrowing money to purchase an asset that will lose value. This can be a concern if you plan to sell the car before paying off the loan, as you may owe more than the car is worth, known as being "upside down" on your loan.

Binding Contract

Car finance typically involves signing a legally binding contract. This means that you are committed to making payments for the agreed-upon term, even if your financial situation changes. If you cannot afford the monthly payments or experience unexpected financial difficulties, it can be challenging to get out of the contract without incurring penalties or damaging your credit score.

Limited Ownership

When you finance a car, the lender has a security interest in the vehicle until the loan is paid off. This means that you do not have complete ownership until the loan is fully repaid. If you default on your payments, the lender has the right to repossess the vehicle. This limited ownership can be a drawback for those who prefer to have full control and ownership over their assets.

Potential Overbuying

Car finance can make it easier for individuals to buy more car than they need or can afford. The availability of affordable monthly payments may entice some people to purchase a more expensive vehicle than they initially planned. This can lead to financial strain and difficulty in meeting the monthly payment obligations, potentially resulting in missed payments or defaulting on the loan.


In conclusion, car finance offers several advantages, such as affordable monthly payments, flexibility, access to newer vehicles, and the opportunity to build credit. However, it also comes with its downsides, including interest charges, depreciation, binding contracts, limited ownership, and the potential for overbuying. Ultimately, the decision of whether car finance is worth it depends on your individual circumstances, financial goals, and preferences. It is crucial to thoroughly assess the pros and cons and consider your long-term financial situation before committing to car finance.

19 October 2023
Written by John Roche