The car purchase on credit – is it really worth it? From when is a car loan really worthwhile?

Basically, you have very different options to consider when buying a new car. Most people still buy their car with cash. So you put the outstanding amount on the dealer’s table and then immediately drive away with the car. However, if you have alternatives, then you could consistently take advantage of other options. The most common options are to take out a loan when buying a car or to buy the car through a leasing company. Leasing works similarly to the procedure with a loan, but here are even more options regarding the subsequent transfer of ownership possible.

There are also different ways of looking at things, for example, the tax options for a purchase via leasing. However, this area is not the subject of consideration here and shall therefore also be disregarded. However, if you look at the purchase via a credit, then here different options and parameters will become striking and these also have an influence on whether the credit purchase could be significantly successful or not. In any case, depending on the success is the credit rate that you have to pay when buying credit. Also important is the credit rating you have with your bank. In truth, it is also a matter of a causal connection, which must always be given here as well. In practice, it will also be necessary or. prove to be very favorable, if you can put a certain cash amount with on the table. Experience shows that in such cases the rates are also much more favorable than in the case of a credit purchase, which is almost completely covered by borrowed capital.

Buying a car through a personal loan

If you need funds to buy your car, a personal loan from a bank or building society is probably the cheapest way to borrow the money. But remember to first consider the advantages and disadvantages of personal loans. Your bank officer will also be able to tell you about your creditworthiness. In a further sequence you can also apply different calculation models and then just test out the best variant for you. You may be able to see how certain facts can then be quickly turned in the right direction.

What are the important points to consider when buying a loan

First and foremost, it’s all about the interest rate you can get. If the interest rate on your offered loan is too high, then all the calculating won’t be worth it either, because in sum, the loan also falls with the interest rate you could get. Therefore, you should obtain as many comparisons as possible, and then see which model is best for you and which bank can offer you the best conditions. You can also learn a lot of new things, because interest is not the same as interest. You have to distinguish between an effective and a nominal interest rate. For you, only the effective interest rate will be decisive for calculation, because this interest rate tells how much your loan will cost until the end of the term. You can usually also take the effective interest rate from the various tables of the offers or of course calculate it yourself. For this purpose, you can also check whether you can also afford the monthly repayment amount and the total amount you will pay the lender.

A fancy new car

If you are not sure if you can afford the monthly payments on top of your household expenses, think about what you can afford. Because usually the dangers are underestimated here.

It is very easy to take out a loan and this is what the banks want too. You should also make a financial plan for this purpose, which will give you accurate information about their financial situation. However, if you can afford it and there are no concerns about repayment, then you might well consider the advantages of taking out a loan.

What are the advantages of buying a loan

First and foremost, the advantage lies in an improved situation of your liquidity. The reason is obvious, because the bank will advance you the money and then will also buy the car for you. So you have more money left for the time being. This is a serious advantage, but one that you need to take advantage of in order to maximize your profits. Only if you also calculate correctly and use these profits elsewhere with a higher profit than the loan costs them, you will gain an advantage from it. This is called the leverage effect and refers to a ratio that is used by very many companies in a daily work. They can save thereby also appropriate costs and see themselves as effective companion of a system of enterprises. Of course, the advantage is that you can benefit from your good credit rating and get a good interest rate from your bank.

For example, you can easily invest the open liquidity in an alternative and earn even more money here. This option has enough risk, but it also has an enormous amount of pleasure and profit for you. It also depends on how your deal is structured. If you manage to agree on a fixed interest rate over a pre-existing term with your bank, then this can consistently be a very big advantage. Different parameters can be useful here and you can really come to a very interesting deal in this way. A good fixed interest rate can also provide planning security.

In leasing, the lessor always remains in possession of the car.”

Unlike other forms of credit, you own the car while paying off the loan. So if you run into financial difficulties, you can sell it. Check with the lender this would be the case before you take out the loan. This is also the big difference with leasing. With leasing the lessor always remains in possession of the car. Of course, here the boundaries are blurred and can not be drawn quite so straight, but in total it could also be an exuberant action, in which you are then forced by the bank to sell the car. Strictly speaking, however, there are considerable differences between leasing and a loan when buying a car.

The disadvantages of personal loans

Of course, there can also be disadvantages to buying a car on credit. However, these disadvantages are usually due to the fact that you do not plan enough and do not make the calculation correctly. You can, for example, set different parameters here, but the example mentioned at the beginning with the poorly completed financial plan is usually very schematic in the sense that disadvantages can also result from taking out a loan. This planning is really very important and determines the success in taking out a loan. There are also other disadvantages.

You may have to wait until the money arrives, although some lenders provide funds almost immediately. Therefore, it is also crucial with which bank you work here. Consider also the following. Personal loans through the bank are not always the cheapest way to borrow money. Sometimes car dealers offer very low interest rates. Then you may also be forced to drive. Taking out a personal loan could affect your credit score.

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