Buying a car: these options for financing are available

Car financing : Car purchase: these options are available for financing

Buying a car: these are your options for financing

A new car is needed. Often the purchase of the vehicle is already planned from long hand and therefore was saved on it. Depending on the purchase price, however, one takes other financing options in addition or finances the car completely. Another way to get a new or used car is to lease it. It is generally important that you do not overstretch yourself with the purchase and also only spend as much as you can handle. What options you have for financing the car and how to do it best, we have summarized here.

Completely stress-free: Cash payment

Those who put cash on the table when buying a car often have an advantage. However, this is very figuratively speaking, because in principle it is a matter of paying for the vehicle in one fell swoop. It does not matter whether you pay cash or transfer the amount.

The advantage of this is that the car then belongs to you directly. You don’t have to make any further payments in the future, except for the fixed costs around the car. Another advantage is the cash discount that can be negotiated with car dealers.

So that the car belongs to you directly after the payment, you have to save, however. Depending on your income and the type of car, this can take several years. However, if you’re in need of a ride, you often don’t have the time to save up for the car of your dreams.

The classic way: pay by installment loan

Most car buyers opt for an installment loan to finance a new or used vehicle. Such classic loans usually have a duration of between one and eight years. The duration depends, of course, on the amount, the installments and the interest rates.

One has different possibilities. Either one inquires with the own house bank, finances over the car dealer or uses an on-line credit. With the latter one should inform oneself however exactly and compare the different offers with each other, in order to really get the best price performance ratio for the credit.

The advantage of these loans, compared to the house bank or financing through the car dealer, is that you get here the loan quickly and easily. For example, there is no need for a Schufa check, and you can also get free advice by phone.

If you decide not to finance the car through the dealer or the car bank, you can also benefit from the cash rebate. As a rule, the loan is paid out quickly and in one fell swoop. So you can pay off the vehicle directly in one sum.

What to consider when taking out a loan

If you want to take out a loan you should consider a few things in advance. First of all, you have to be of age, have your main residence in Germany and a German bank account. In addition, you should be able to prove that you have a sufficient credit rating and that you have a regular income.

To prove all this, certain documents are required:

  • Current salary statements, bank statements or tax assessment notices showing information about financial circumstances.
  • Details of the car, such as a copy of the purchase contract, mileage and the make and type of the vehicle.

It is often more difficult to prove a sufficient credit rating, especially for young adults who are, for example, currently in training. Here a second borrower can help out, who has the required credit rating. Another way to improve his chances of credit is a guarantee from parents.

At the end of the loan period, the car then becomes the property of the buyer. Many banks also offer the option of increasing the installments or paying off the loan completely earlier.

Those who have already saved money for the car also have an advantage here. Depending on the amount saved, the loan does not have to be as high, which at the same time has a positive effect on interest rates. In general, it is recommended as the car purchase, whether used or new car, to commit with some initial capital.

Drive and return: Leasing

Leasing is a financing method in which you drive the car for a certain period of time, but usually return it afterwards. In principle it works like a rental contract.

In general, the monthly costs are lower than for the repayment of a loan. However, after two to three years you no longer have a car and the money you put into the leased car is gone. Some providers, on the other hand, offer to buy the car after leasing it.

Three ways financing

Around half of all new car buyers use three-way financing. This option is based on a payment of installments in the first years, which are usually much lower than with an installment loan. After the expiration of a term there are then three different options for the owner of the car.

You can take over the car completely for the residual value. Financing can continue in the form of a classic installment loan. In the third option, the car is simply returned. The already paid down payments are lost as with leasing.

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