A new car is often something very special and makes for a completely new attitude to life. When it comes to the purchase of a new car, perhaps even the long-awaited dream car, it is important above all that the financing is under a good star. New or used cars are usually not paid exclusively by equity, so there is usually a car loan in addition to a share of equity or a down payment.
Car loans are due to the current low-interest phase as cheap as never before offered, but there is still a lot to consider when choosing the optimal car loan. The following guidebook contains important aspects around the topic of car loan, which ensure with adherence that one gets for his new car not only a low-interest, but also a flexible financing.
Even with car loan: The interest rate is as always the most important feature
Since the inclusion of a car loan is of course associated with costs and they always play a major role from the consumer’s point of view, it comes mainly to the interest rate on auto financing. Since the financing of a car from a banking perspective is a legitimate reason for borrowing, car loans are always offered in comparison to the typical personal loan (free use, such as debt account rescheduling) subsidized interest rates. This is also related to the fact that the car is a valuable object, which of course also represents a certain security. Whether or not the new vehicle is given as collateral in the credit agreement, of course, depends entirely on the requirements of each bank and the financial background of the borrower.
A favorable interest rate is ultimately important so that the new car is not significantly more expensive than the original purchase price within the term. This happens with a higher interest rate (for example, 5.00 – 6.00%), especially when repaying in proportion to the loan amount with a low repayment installment. Of course, a long period of time will lead to corresponding costs, but in the age of low interest rates, there are many opportunities to finance the purchase of a new car with significantly lower interest rates. In order to filter out these offers, one does not look at the conditions for general private and consumer loans, but only for earmarked car loans.
The loan calculator determines the cheapest interest rate
As a consumer, of course, it is not easy when it comes to gaining market transparency in the “credit jungle”. Often, the current account house bank is the first port of call – but in the modern age of the Internet, it would be extremely fatal if one did not compare online before completing a car loan. The well-known credit portal offers a very helpful credit calculator, which queries the current conditions of over 40 banks and compares them. As a loan applicant, you will get within seconds a meaningful overview of the current top conditions. Even though these are generally dependent on creditworthiness and only have to be confirmed by a specific request from the respective banks – the credit comparison calculator24 shows very well which bank is worthwhile to ask for a car loan.
With a loan amount of 10,000.00 Euro and a term of 60 months, the current top conditions are 2.63% and 2.79% APR (as of 15.03.2017). Such favorable interest rates were unthinkable a few years ago, even with a mortgage backed loan. This shows that this is an excellent time to think about buying a new car. Tip: If a new car is to be bought, many borrowers sell their current vehicle. If it is planned that the capital thus released should be included in the financing, the respective amount should always be stated as equity / down payment. Many banks, in line with the construction financing sector, reimburse their own funds and may thereby award even better interest rates.
Why borrowing is often better than a lease financing?
When it comes to buying a new car, many consumers are considering whether leasing finance might not be more interesting than a car loan. The monthly burden on a leasing contract is usually lower, but it must be said very clearly that you will not become the owner of the vehicle when leasing in the years of the contract period. With a car loan one knows that one acquires part of the vehicle month by month and this, after payment of the loan amount, can continue to use and unrestrictedly. Although a leasing takeover is also offered by numerous car manufacturers and car dealerships, experience shows that the residual values to be paid for the takeover are often set too high. In addition, as a private individual, leasing does not give rise to any expenses which can be taxed at the end of the year, which is a clear advantage in the area of commercial leasing.
In terms of flexibility, too, you have to cut back on leasing. A leasing contract can not be resolved so easily if you want to part with the vehicle during the contract period, for whatever reason. In the case of a car loan, it is basically possible to sell the car in order to pay off the outstanding amount of credit. Especially with the current low interest rates, taking out a car loan thus represents a more attractive and flexible financing option.
Flexibility in car loan – special repayments and free rate adjustment
In addition to the interest rate, of course, there are other factors to consider when choosing a good car loan. As a borrower, you should always allow a degree of flexibility from the bank, for example when it comes to issues such as additional special repayments and free installment. Many “additional benefits” can be fully integrated into the loan agreement regardless of the interest rate, so they are not priced in. It is therefore always worthwhile to address topics such as rate adjustment in a personal conversation with the respective bank. Although special repayments are usually standard in the field of car loans, you should always make sure as a borrower that you are granted an unrestricted special repayment right.
The free rate adjustment during the contract is a bit more special, but in the age of “modern loans”, such an option is not a problem for most banks. Rate adjustments may be important, for example, in the event of a financial bottleneck (for example, due to unplanned repair costs or short-term unemployment), so that the monthly loan installment does not overburden the household budget. Tip: When it comes to the negotiation of flexibility-enhancing benefits, so it is always recommended, when talking to Bank mentioned that a free rate adjustment at Bank Y would have been possible. In principle, all credit institutions can offer flexible additional services, which is why the situation of fierce competition in the credit market can be made an advantage here.
The vehicle registration as security – that is to be considered
Many banks require the deposit of a vehicle registration certificate (registration certificate II) for the granting of a subsidized car loan. This increases the security of the bank and there is no doubt that the borrower actually used the money to buy the car. From the point of view of the borrower there are no direct disadvantages in connection with the vehicle letter deposit, nevertheless one should pay attention to this topic a lot. First of all, it may be that the credit agreement obliges you to deposit your vehicle registration document with the respective bank within a certain period of time. If you violate this deadline, it may happen that the bank raises the interest rate. In addition, you should check before signing the credit agreement, whether the vehicle registration is returned immediately after the loan repayment. After all, this is important to be able to legally dispose of the vehicle 100% and not only to be the owner but also the owner.
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