Your own car is of considerable importance to most people. It only represents a certain form of freedom but is also indispensable when one is on the way to work or long journeys are imminent.
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Therefore, if a vehicle has once served its purpose or is not fit to drive for other reasons, it must be replaced as soon as possible. Of course, many can not afford the cost of a direct purchase from their own pockets. So here must be a loan that takes over the costs.
But there are many questions. What’s the better choice here – a classic car loan or a finance. What must be respected and what stumbling blocks can hide in the contracts. Questions that should all be answered here.
What are a car loan and leasing?
A car loan is the usual form of installment loan that is taken for the purchase of a vehicle. He can either be purchased as a cash advance, which basically any car in the appropriate price range can be purchased.
However, the most used is the financing, where the vehicle is purchased through a dealer. This gets from the respective bank – in most cases, it is the in-house banks of the manufacturer – then immediately transferred the money. The borrower must now repay this amount at the respective institution by means of a monthly installment. This form of auto finance is not new and has been used for decades.
Another possibility is leasing, which can be considered as rent for a vehicle with a purchase option. Again, there are two ways in which this business relationship can be handled. When leasing a car is rented for a certain time.
For this the customer has to pay monthly installments, which are similar to a usual credit. However, this is only the case if the vehicle is returned after the end of the term. Should there be a purchase option in the room, the installments already paid will be offset against the vehicle value, leaving a residual value at the end. This must either be repaid immediately or can be paid in a new contract then until the actual purchase. If there is a purchase option, the interest rates are usually much cheaper.
Who offers financing and leasing cars?
Almost all banks today have a car loan in their repertoire. For example, this applies to the More Bank, which awards it for around 3.07 percent and grants it a variable term. All of this is done without any fees, only a prepayment penalty of 5% of the residual value has to be paid if the loan is redeemed early.
Felm also has similar terms here, with the best value at an interest rate of around 5.3 percent. However, this is dependent on the credit rating and also an account maintenance fee of 9.90 euros must be paid on the entire term. An advantage, however, is the optional residual debt insurance, which protects the borrower in difficult life situations.
In the end, the Alfon Bank and Fonso can be called, which awards your car loan for a minimum interest rate of about 5.4 percent, but here also the credit rating plays a role. There are no fees or even prepayment penalties here, but the maximum term can only be set at 84 months.
The only provider that also has a lease in the program, in this selection is the Moore Bank. It has contracts with many vendors, so you often find their name in this area. No general statement can be made about the interest rates because this differs from provider to provider and also from region to region. Only it can be stated here that with a purchase option which the customer holds open, the interest rate falls clearly under the normal car loans. This, of course, has an advantage, because so the new car is much cheaper in the end.
The appearance is deceptive
But the beautiful appearance of the leasing can also deceive, because true to the motto nobody has to give it away, no wishes are fulfilled here. If the car is returned at the end of the term, the user must be liable for all damages incurred up to this point. This also applies to minimal deficiencies, which you might never or at least not repair so quickly. Here considerable costs can arise, which must not be neglected.
In addition, in the course of this process may incur additional costs, because any appraisers or other professionals must ultimately be paid by the lessee. All of this can bring about a poll of costs that quickly blows up your own budget.
On top of that, the inclusive miles have to be considered. This is a fixed number of kilometers that the customer can travel a year without having to pay extra. Thereafter, as a rule, a lump sum is added to the leasing rate per hundred kilometers traveled. Again, it may be expensive if you exceed these limits too far.
Would financing be the better choice?
A financing is much cheaper than a lease, because here it is clear that the owner will keep the car and thus must bear all costs of repairs or defects itself. Of course, he has the choice of when, and to what extent he would like to have this work carried out.
However, this is not quite so easy because in addition to the higher interest rate, there are other issues to consider. If the rate can not be paid, the car can be picked up again at any time. This is then sold at the residual value so that the debt is paid out of the amount. However, this only works if the vehicle is age-appropriate and has no massive damage. Any damage inevitably causes the value to be significantly reduced. The higher the sum that the borrower has to settle at the end when the vehicle has been picked up.
In addition, it is crucial whether a car loan has a fixed or a variable interest rate. If the interest rate is variable, it can suddenly skyrocket as conditions change on the market. On the other hand, he can also fall when a low interest period is in the room. Of course, the rate must continue to be paid even if the vehicle suffers a total loss. Here only fully comprehensive insurance can remedy, but even then only the time value of the vehicle is replaced.
Which type of financing can be recommended?
It depends only on the personal circumstances, which kind of financing is the better choice for you. Who drives only a few miles a year and tends to care for his car, is well served by a lease, because he usually does not have to worry that the car later has major flaws.
Frequent drivers, who are often on the road and thus consume thousands of kilometers in one year, should rather resort to normal car financing. Here, the risk is then alone with one, but it comes – if everything works smoothly – at least no horrendous sums together because of the mileage allowance.
A look into the documents
Both with a car finance as well as with a lease contract worth a look in the documents. All essential rules must be defined here. This is where points can hide that sometimes go very well in money. Since the formulations differ from bank to bank, no precise statement can be made about them. However, it is generally better to seek advice in this context.