practical tip: separate financing of car and real estate

Practical tip: separate financing from car and real estate

In many new building areas not only beautiful houses can be admired. Often parked in front of the houses also beautiful cars, not infrequently fancy new cars. Outsiders sometimes wonder how people can afford such cars when they have only recently built.

Finally, this is an open secret: Many builders do not miss the opportunity to finance a car together with their property. This approach is now widespread. However, it brings not only advantages, but also disadvantages.

Financing a car with a real estate loan

The processing of such financing is relatively simple. Two things are decisive. First, a property must serve as collateral, i.h. a security by land charge can be made. In addition, the bank must be willing to grant such a loan. Whether the bank agrees to grant a loan depends primarily on the mortgaging of the property. The more equity the builder can use in his financing, the more likely the bank will be willing to finance a car as well. Thus, creditworthiness and equity play a major role.

Advantages and disadvantages of such car financing

The main advantage of financing a car with a real estate loan is that the terms and conditions are favorable. With a little luck it is possible to finance the car at extremely low interest rates. The car loans offered by car dealers often seem expensive in comparison.

However, there are also disadvantages. This includes above all the higher loan-to-value ratio for real estate loans. While it depends on the individual case, it is highly likely that financing the car will result in a worse loan-to-value ratio, which in turn will result in a higher interest rate on the loan. In this context, it should be borne in mind that this can make the entire real estate financing more expensive.
This is precisely where there is a great danger. Assuming that the interest rate increases by only a tenth of a percent, but the financing amounts to several hundred thousand euros in total, there is the threat of a considerable increase in the total interest burden.

Then there is the term of the financing. Real estate loans are usually concluded in connection with long fixed interest rates. Cars are usually not driven for very long, d.h. Under certain circumstances, a car is still being paid off even though it no longer exists. In addition, there is the comparatively pronounced depreciation to which motor vehicles are subject.

Financing a car cleverly

In view of these not inconsiderable disadvantages, building owners should definitely check in detail whether it is really worthwhile for them to buy a car and to co-finance it via the real estate loan. It may be possible to finance the car in this way at a very low interest rate. On the other hand, the entire financing could become significantly more expensive, so that it may be better to refrain from such a solution.

In this case, it makes sense to choose a stand-alone car loan. Separate financing brings its own advantages. First and foremost, there is the fact of being able to strictly separate real estate and car in terms of financing. In addition, first-class conditions are now lurking in the area of car loans. Low loan interest rates are available even without collateralizing the loan via real estate.

Likewise the topic flexibility is not to be disregarded. Real estate loans are considered to be comparatively rigid, while car loans can usually be repaid quickly and easily if necessary. Assuming the vehicle is for sale, the remaining debt can usually be repaid to the bank without any problems and without additional costs.

However, it is not possible to make a general statement about where the best conditions for vehicle financing are to be found. Many car banks offer car loans with low interest rates. But direct banks are also playing a leading role, especially in the financing of annual and used vehicles. Anyone interested should therefore take their time and first make a comparison. Our car loan comparison provides valuable support, it is quickly determined where the car can be financed cheaply.

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