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6 Tips to Finance Luxury Purchases

According to a 2021 CNBC report, the average American has more than $90,000 in debt, including student loans, personal loans, mortgages, and credit cards. With these debts looming, and the expectation to repay the balance, making luxury purchases can seem out of the question. 

While the important thing to remember is that luxury items are a luxury, not a need, it’s ok to treat yourself sometimes—as long as you can afford it and you’re paying all necessary expenses first. 

If you’re shopping for a luxury item and are looking for financing that’s affordable, you’ll need to take some time to research and compare options that may be available. Here are a few tips to get you started. 

Research your options

When it comes to financing, there are a lot of options out there. Doing research online or talking with a financial advisor can help you make the best decision for your needs. 

One thing you should do is visit your bank or credit union to learn if your existing relationship can help you get better rates or terms. You may also consider letting the manufacturer or dealer access and share any financing deals they have.

Look for financing incentives

Depending on what you’re looking to finance, some manufacturers give incentives such as rebate options or low-interest rates, even as low as 0% for a certain period of time. Depending on the length, low or 0% interest rates could potentially save you a lot of money over the life of the loan. 

luxury financing

Pay more upfront

When you’re making a large purchase that needs financing, the bank or lender wants to know the risk and likelihood that you’ll default on the loan or be unable to make payments. The lower the risk, the more likely you are to be approved for the financing and get a better rate. One way to lower that risk is by putting more money down upfront. This will make your loan amount lower, which not only improves your chances of getting a better interest rate—it also helps you save money in the long run.

Consider shorter terms

If you’re able to afford higher monthly payments, consider a shorter term for a loan or other financing option. Sometimes this may get you lower interest rates, and it allows you to pay off the purchase faster while also saving money on the accrued interest. In most cases, you should opt for the shortest term with monthly payments you can afford. 

Compare renting vs. buying

Some luxury purchases make more sense to rent or lease instead of buying outright. For example, monthly lease payments for a luxury vehicle are typically less than monthly auto loan payments. There are also a number of options for renting designer clothing, accessories, or other items for a short period of time at a significantly lower cost. 

Ask about payment plans

Depending on the purchase, you may not have to get additional financing at all. Talk to the manufacturer or dealer about payment plans that may be available. You may be able to negotiate a down payment and reasonable monthly payments directly to the company instead of through a loan or other financing option.

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