In the search for car loans, you will soon find what you are looking for as a potential borrower. Many providers try to outdo each other in terms and conditions and interest rates. However, one should not lock up car financing without careful consideration, because even in this situation there is a lot to be borne in mind for borrowers if they do not want to spend too much money on a loan.
Where does the financing for the car come from?
There are two common ways to get financing for a car: through the manufacturer’s dealer or car bank and through a regular commercial bank. Both variants offer their own advantages and disadvantages that should be weighed against each other. There are also countless offers from both, so it’s best to consult a loan comparison. You can quickly find what you are looking for on the Internet, as the various conditions are compared on numerous pages. But even here it is important not to go straight to the cheapest offer.
As with normal installment loans, some key features should also be considered here. The most important is the effective interest rate. All other costs are included in this interest rate compared to the nominal or nominal interest rate. So he gives an idea about what the financing for the car will ultimately cost exactly.
Common practice in car loans is to make the collateralization by retention of title. This offers the financing institution the advantage that the loan is in any case secured by an adequate equivalent value and the customer can thereby be granted cheaper interest rates. A feature that especially catches the eye, comparing car loans with normal installment loans. The difference is usually 2% to 3%.
Financing via business and auto bank
The car loans of ordinary commercial banks have one particular advantage: the borrower is able to act as a cash payer with the merchant. This often brings substantial discounts and bonuses as part of financing for a car.
Of course, if you apply for a car loan from a manufacturer’s bank, this advantage can not be claimed. But the auto banks often offer cheaper interest rates than commercial banks. The financing for a car on the Autobank, however, can also bring disadvantages. On the one hand there is the bondage to a certain brand, because manufacturers understandably usually only finance their own vehicles.
On the other hand, it often happens that certain financing for a car or conditions are linked to a particular model. This makes the offer more confusing and also makes it difficult to compare different offers.
Autobank usually offer a financing with final installment. Especially with the financing for a car, this variant is very common. At the beginning of the contract, a down payment is made, whether with or without a final installment. Thereafter, the regular capital service begins. If a final installment has been agreed as a borrower, the debt service will be much lower depending on the size of the final installment. This offers the advantage of stable liquidity over the entire term.
Towards the end of the financing for the car, the borrower can then usually choose between three different variants, how to deal with the final installment. The easiest way is to pay the final installment, which transfers ownership of the car to the buyer. However, it is also possible to pay off the final installment by means of follow-up financing over a longer period. The third possibility is the return of the vehicle to the dealer, whereby the final rate is waived and you can choose a new vehicle.