If you need a car loan, you usually have the choice: either take it out directly with the dealer or go to an independent bank? In our article no credit check buy now pay later | Muscle Car Facts you will find out how you can save money when buying a car with a cheap car loan from an independent bank.
What is a car loan?
A car loan is basically a normal installment loan. Most car buyers choose between dealer financing and a car loan from an independent bank. The car loan from an independent bank is usually earmarked. As a result, it offers better interest rates than an untied installment loan. Earmarking means that you are obliged to use the loan amount for a car purchase. So you are not allowed to buy anything else.
Why does the bank offer better interest rates? Because the car is a countervalue and thus increases your creditworthiness. The car serves the bank as security, because in an emergency it can be sold and turned into money. This is why banks are more generous when it comes to interest rates, making car loans the cheaper alternative to dealer financing in most cases.
Comparison of car loans and dealer financing
Financing the car directly at the dealer sounds practical at first. It saves you the extra trip to the bank and is quick and uncomplicated. When you take out a car loan from an independent bank, on the other hand, you have to invest energy and obtain offers yourself. But this investment is worth it, because independent banks usually offer better loan interest rates. In the following, we would like to explain to you what constitutes a car loan from an independent bank and dealer financing.
The lower the interest rate, the cheaper the loan. At first glance, the mostly good interest conditions for dealer loans are not automatically the best. Be particularly attentive if the dealer offers you a supposed zero percent financing. That sounds extremely tempting at first. But the dealer certainly has nothing to give away. This is why they often add the credit costs incurred anyway to the vehicle price. Then the dealer credit is cheap, but the car is more expensive than necessary.
However, you can still get an offer from the dealer. Never take out the loan directly on the spot, but take the papers home with you. This gives you the opportunity to compare the dealer’s conditions with offers from independent banks.
Comparison of car loans and leasing
Leasing is another type of car financing. In leasing, you are given a car at a monthly rate. It is in principle an atypical rental agreement and not 1 to 1 comparable to car financing. Nevertheless, we do not want to deprive you of this type of car purchase.
Unlike conventional financing, you do not own the car when leasing it. You should therefore not sell the car during the term of the leasing contract. At the end of the term, you have the choice of buying the car from the lessor for a residual amount or looking for something new.
When is leasing worthwhile?
At first glance, leasing seems to be more flexible and cheaper than a car loan, but the obligations and restrictions can make driving fun and increase the leasing instalments. It is therefore important to calculate exactly whether leasing is worthwhile for your needs or not.
With a car loan from an independent bank, you can’t just drive as many kilometres a year as you want. You can also design your vehicle in the way that suits you and are the owner and not just the tenant of the car. In addition, a car in your possession increases your creditworthiness because it provides material security.
Important contract contents of a car loan
It doesn’t matter whether you opt for dealer financing or a car loan from an independent bank: Both types of credit are basically similar, because both are consumer credits. Therefore, the following tips apply equally to both: There are certain contract contents that you should take a closer look at.
Possible handling charges
In 2014, the Federal Supreme Court ruled that no processing fees may be charged for loans in general, i.e. also for car loans in particular. Nevertheless, please check this point carefully. In particular, in the case of installment loans, no costs may be passed on to the customer for bureaucratic expenses such as checking creditworthiness.