We have already said that a car loan is characterized by low interest rates . Are you wondering why? The explanation is simple: the bank has additional security compared to unrestricted loans. The risk for the bank is lower because the car can be turned into money again if necessary.
The bank can also take the car directly as collateral. In the case of such transfer by way of security , in which the bank receives the registration certificate Part II (Kfz-letter) as credit security, the car then belongs until the bank's loan has been repaid in full.
If you want to buy a car, you have several lenders to choose from. For example, you can get your car loan at
your house bank, the savings bank, a direct bank or
close directly with the dealer's or manufacturer's car bank.
There are also some advantages and disadvantages to be weighed, which we do not want to keep from you. In any case, it is important that you find out from the various providers before you buy a car and take out the car loan and compare the loans and conditions in order to get the best offer for you.
If you decide to take out your car loan with your house bank or a direct bank, the loan works like a classic installment loan. Means: You receive the entire loan amount from the bank in one go and can therefore act as a "cash payer" at the car dealer and thus secure yourself a proper percentage on the purchase price.
You then pay your car loan back to the bank in the normal way in the predetermined monthly installments (including the effective annual interest rate ) over the entire term and you are debt-free again when you pay the final installment.
If you go to the dealership for advice on a purchase, the seller will very likely offer you the Car . The dealer will usually speak of zero percent financing . But be careful: Even if this type of financing sounds great at first - after all, you don't have to pay any interest or fees - it doesn't have to be the best offer. This is because the trader has to pay a large part of the interest subsidy himself. It is unlikely that he will give you an extra discount on the vehicle price.
In addition to zero percent financing, car dealers also offer car loans in the form of balloon financing , a car loan with a final installment, or three-way financing .
In contrast to a normal motor vehicle loan, the bank, i.e. the installment loan, finances a balloon only in part no credit check car finance of the loan amount. The remaining amount, which may well be 50 percent of the total amount, must be paid back to the car bank as the final installment at the end of the term . The advantage of balloon financing is that the monthly rates are comparatively low.
An example: While you are repaying the purchase amount of 10,000 euros at your bank over 48 months, only a financing sum of 6,000 euros is required for balloon financing. The remaining 4,000 euros are then to be paid as the final installment. With a loan of 6,000 euros, the monthly installments are of course lower than for the 10,000 euros.
In addition to balloon financing, there is also three-way financing , which is a special form of balloon financing. The main focus is on the final installment, which the borrower can pay in three different ways (hence the name):
The final installment is paid in full in one fell swoop. In this case, the vehicle is completely in the possession of the car buyer.
The final installment itself will be financed again. The auto bank makes a corresponding offer to the buyer with interest costs and the corresponding monthly installments. The car only belongs to the consumer after repayment.
The final installment is exchanged for the car. In this case, the car bank makes the offer to take back the vehicle at the end of the loan term. This will settle the open closing rate and the car belongs to the bank.