In this country, new vehicles are mostly bought on credit, and very few drivers can simply put the purchase price on the table in cash. The sellers know about this problem and are happy to come up with a “dealer financing”. They often advertise with so-called zero financing, which suggests that the customer can use the loan practically free of charge. Of course this is not the case, the loan interest is already priced in with such offers, and they only apply to certain models and equipment options.
Customers usually drive cheaper if they refuse dealer financing and choose and take out a car loan on the open market. With the borrowed money in their pocket, they can start negotiating with the seller as a cash payer and purchase the vehicle far below the current list price. They also have a free choice from the model range and do not have to consider any restrictions in the equipment variants.
Two types of credit are particularly suitable for buying a car, balloon financing and the ordinary installment loan. Balloon financing offers particularly low monthly installments, because a large part of the debt is only repaid by a high final installment at the end of the term. The loan agreement is calculated in such a way that the final installment corresponds to the residual value of the vehicle. The borrower is then free to decide whether to fully pay off or return the vehicle. Due to the low repayment rates, this financing is considered an ideal self-employed car loan, with its often fluctuating income.
Ordinary installment loan
The vehicle is paid off in full by fixed monthly installments until the end of the term. A correspondingly long period (up to 84 months) with low repayment rates is granted for the complete repayment, the residual value of the car is irrelevant. Installment loans are usually not earmarked, the borrower does not have to deposit the vehicle as security.
In the search for the cheapest car financing, comparison portals like Carcredit Plus are a real help. There consumers can compare and save the car loan accounts. The focus of the comparison is on the effective interest, which, according to the legislator, must already include the additional costs of the loan.