When it comes to fulfilling the dream of owning four wheels, for many car buyers that means thinking about financing as a first step. And of course the dealers and the numerous credit institutions know that too, and they lure prospective buyers with supposedly attractive interest rates, particularly favorable repayment rates and extra short terms. But what looks like a good deal at first glance can quickly develop into a financial problem – at least if you don’t take the time to compare the different offers with each other. But what exactly should you pay attention to? What financing options and models are there anyway? And what distinguishes the classic car loan from other loans?
Car Loans vs installment Loans: What’s the Difference?
When asked about the potentially best and at the same time cheapest financing, most car buyers will find out relatively quickly that there are not only different providers, but also very different types of credit. The so-called car loans are considered an all-time classic – not least because the majority of borrowers choose exactly this due to the usually very low interest rates. Good to know: The low interest rates on a car loan are mainly possible because the banks only have a very low risk of default compared to an installment or regular loan and at the same time can use the car itself as security. However, the borrower can then no longer (re)sell the vehicle so easily, since both the vehicle registration document and the actual title deed remain with the bank until the loan has been repaid in full.
The installment loan, which is also known under the term consumer loan, is concluded with a fixed term and a fixed interest rate. In order to get this loan from the bank, however, a Schufa check is usually necessary. In addition, the interest rates are on average several percentage points higher than with a normal car loan. In addition, the borrower has to provide the bank with additional collateral to secure the loan – the car itself is not usually sufficient as collateral here. Tip: Before you finally decide on a type of loan, you should definitely take the time and compare the different offers without any time pressure, since expensive vehicles in particular can often save several thousand euros.
What are the advantages and disadvantages of paying in cash compared to financing?
In addition to the financing models already mentioned, car buyers also have the option of paying for the vehicle they want in cash. Good to know: “Payment in cash” is generally understood to include the transfer of the requested amount. So you don’t have to go to the dealer with a suitcase full of money. The main advantage of cash payment is that most dealers are more likely to accept particularly high discounts and other (cheap) additional services (e.g. for car insurance). However, cash payment also has a catch, as the amount due must be paid directly and in full on the day of handover. And what might be possible with older used cars without major problems usually tears a big hole in your wallet with new cars. However, if you can afford it, you should definitely consider paying in cash as a cost-effective alternative.
Does residual debt insurance even make sense when financing a car?
If you decide to take out a car loan from a bank, you will quickly find that most credit institutions will also offer what is known as residual debt insurance. But what exactly is that? And what are the advantages for the borrower? Simply put, residual debt insurance is a special form of protection that comes into effect as soon as the borrower can no longer pay the installments due. The remaining amounts are then covered by the insurance company. In addition, possible over-indebtedness and a negative Schufa entry can be prevented. But what at first glance looks like a good way to protect yourself against possible insolvency has several potential disadvantages.
On the one hand, residual debt insurance is usually very expensive, which has an extremely negative effect on the monthly fixed costs. On the other hand, many of these insurances only take effect in absolutely exceptional cases, for example in the case of a demonstrably not self-inflicted unemployment or a serious illness. In addition, a residual debt insurance cannot usually be canceled just like that and without a good reason. Therefore, many experts advise against such a discharge of residual debt – especially since you should ideally only buy a car on credit if you can be sure that you will be able to pay off the repayment installments in the future without any problems.
How to Get Your Dream Car
If you’re like most people, you’ve always wanted a car that’s just a little bit different from the rest. Maybe you want a sports car that’s not too expensive to maintain, or a luxury sedan that’s comfortable and stylish. Whatever your dream car might be, you can learn a lot about it by doing some research.
First, you’ll want to find out where you can buy your dream car. There are plenty of dealerships across the United States, and you can find cars for all budgets. You can also buy cars new or used, and you can even consider leasing if you want to pay less up front but have more flexibility in the long run.
Once you’ve decided on a car, it’s time to set some saving goals. You may want to aim for a certain price range, or you may want to buy a car that’s in your budget. You can also consider making a car purchase a holiday tradition, so that you have a goal to aim for every year.
Next, consider whether you should buy or lease your car. Buying a car can be a more expensive upfront investment, but it can also be a more long-term investment. Leasing can be a great option if you don’t have a lot of money to save up, or if you’re not sure you’ll be able to afford a car in the long term.
Once you’ve decided on your car-buying strategy, make sure you get a good price. Car dealerships generally have different prices for different models, and you’ll want to find the best deal possible. You can also check online listings to get an idea of the prices that cars in your budget are selling for.
Finally, make sure you have all the necessary documents in order before you go shopping. You’ll need a driver’s license, proof of insurance, and your registration. If you’re buying a car, make sure you have a copy of the inspection report, too.
With a little preparation and some research, you can get your dream car. Just make sure you’re prepared to spend some time and money on the process!
Conclusion
If you’re looking to get your dream car quickly and easily, there are a few things you can do. First, research the car you want and find what kind of prices are available. Next, go to car auctions or classified ads and look for deals that fit your budget. Finally, don’t be afraid to bargain and look for a car that’s at a cheaper price than you thought possible. With a little effort, you can get the car you’ve always wanted without any hassle.