With the loan to buy a car, many make the decision easy. Car dealers take a look at the effective interest rate and the financing. They do not consider how much money could be saved if the overall car purchase is rated.
We want you to finance your vehicle purchase at low interest and make optimal use of all other savings options. Find out why retailer credit is worthwhile for a few, but can be expensive for the majority.
Credit for buying a car – for whom is dealer financing worthwhile?
Few drivers finance their car purchase exclusively from the high edge. Around 60 percent rely on the loan to buy a car. 0 percent financing costs on the large cardboard signs in car dealerships are particularly inviting. A little smaller is how long the interest is waived and what other options are granted.
Vehicle buyers who regularly only order new cars are well advised when it comes to dealer financing. Only the dealer can offer three-way financing that guarantees a vehicle return at the time of purchase. This is the only way for customers to know exactly how much money they will get back when exchanging for the next new car.
The three-way financing is a balloon loan, in which the vehicle rate is calculated so that it corresponds to the expected loss in value. If a little more is paid off, the buyer basically “saves” for the down payment of the coming vehicle. The whole thing financed to zero percent, no bank can keep up. But this buying behavior is still not cheap.
A credit for buying a car using the three-way financing is only cheap if the bottom line is otherwise, if it were rented or leased.
Buying a new vehicle – include all factors
Almost every credit institution offers car loans to its customers. With an average good credit rating, the loan can be granted securely and at low interest rates. The real value of the vehicle and personal creditworthiness guarantee the loan. But of course no bank lends the money without interest. The savings effect when leveraged is coming from a different direction.
The dealer can only offer low interest rates on a car purchase loan because he takes over part of the real interest himself. Starting from the list price, traders have a range of 20-30 percent with which they can give in on the price, sponsor interest or give away extras. The size of the range in individual cases depends on the model and the vehicle brand, but also on possible risks.
The discount is particularly generous when buying a vehicle is a definitive thing for the dealer. He does not have to worry about taking the car back or problems if the loan is not paid. He is therefore happy to sweeten the decision in cash with the maximum discount. – Provided that there is hard negotiation, after all, car trading is the evolutionary successor to horse trading.
If 30 percent were saved when buying a Golf, that would be around 6,000 USD. If 20,000 USD with a term of 48 months were financed at purchase at an interest independent of creditworthiness, the credit comparison shows 3.11 percent effective interest. Financing costs a total of 1,277.19 USD in financing costs. With a maximum discount, the interest-bearing credit for buying a car would save 4,722.81 USD.
Even if only an additional 10 percent discount for cash payment were negotiable, the debt financing of the car purchase would still pay off. Then it would still be 722 USD, which could be saved from the zero interest from the advertising sign. – But whoever is only offered a 10 percent discount should change the negotiator. At least 20 percent are common when buying cash.
Buying a used vehicle – the dealer is too expensive
When selling used vehicles, the dealer has little scope for generous discounts. He must give a guarantee on the used vehicle, whether he likes it or not. The vehicle guarantee is a real risk for him. Getting a used car from the yard for little money is not worth it for the car dealer. Unless the car is exported.
The used car loan from an online bank also saves on used vehicles. Car buyers who are not dependent on a used car loan from the dealer are looking for private sales. Numerous portals show every model that could be on the car dealership, cheaper by private individuals. Without a guarantee, but often at the real dealer purchase price, these vehicles change owners.
With a vehicle value – in dealer sales – of 10,000 USD, about 2,000 – 3,000 USD can be saved by buying privately. It is the low rates of balloon financing that lead to dealer credit, but can still be bought privately. For example, carcredit offers the loan to buy a car as a final installment loan from the Best Bank.
Car credit with poor creditworthiness – protecting opportunities
If the financial situation is somewhat tense, and there is insufficient security through proof of income (self-employed), we recommend that you apply for a loan on Good Finance.
A loan to buy a car could be financed through Good Finance by a risk-taking bank or private investors. In this way, a borrower retains all chances of buying a car across the board, even in difficult credit situations.