Cash or Finance ?

Back in day if you want to buy car you have to be a super rich i.e.  Landlord, doctor or well-established business man because there were very few cars and available only on cash payment. With Japanese imported cars gaining popularity in Pakistan and Banking privatization meant that interest in cars soared up so commercial banks started car loans where you can get a car with down payment of 40% and rest to be paid in installments .But you can take the driving seats of your car which stays in banks ownership with borrower taking the driving seat. Today I will compare buying from bank (buying on finance) or buying on cash.

Buying on Cash :

Suppose that you are buying a 1000cc Suzuki Cultus vxri with base price of 12.5 LAKHS Pkr .But this is not the prize you are going to pay  normally buying a  brand new car from showroom you have to either wait or pay extra cash to your car in earliest slot (which is known as ON) normally that option costs you 60 thousand Depending on availability and demand of the car .some cars are now sold at on more then thousands Pkr. With adding insurance and tracker the price of vehicles reaches to 14 lacs Pkr and 50k registration and taxes means the on road price of a Suzuki Cultus is almost 15 lacs .The major advantage of buying on cash is that you are the owner of the car .


Buying on finance : There are 2 types of finance deals available in Pakistan one is installment based purchase and other is lease .(sort of ) due to heavy competition you can get the car by only paying 20% of its total value and rest on different installment packages ranging from 3 to 7 years .Keep in mind  your installments are based on Amortization usually and you end up paying 30 % more then buying outright on cash.But majority of on long run the car might be costly like Annual percentage rate but on the shorter terms you end up with car keys which comes fully insured in the package one of benefits of buying on finance that you can get cheaper tracker and insurance rates ,you take control of car while the ownership remains in the bank and will be transferred to the client .The average total amount you end up paying on your financed car is 20 to 30% more then you pay on cash.If you are unable to pay your installments then you might end up losing your pride and joy(car) ,bank will auction the car to recover the amount you owe to bank .

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The popular choice among Pakistani is still direct cash method .Probably due to forbidden element of interest which is banned in Islam .car finance is becoming famous in Pakistan it,but it has a major flaw of limitation banks only fund newer cars so the unlike abroad people with low capital limits have no other option to get a rusty old  saloon or a mid aged Suzuki Mehran .And if you are leasing be careful some financial institutions might put mileage clause which can be very painful at times .

You are the ultimate decision maker of your car but keep in mind the benefits and hazards of these cash or finance options.

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