Offered by many organizations (banks, credit platforms, dealers), car credit makes it possible to buy a new or used car, a crucial issue to facilitate daily journeys! What should you know to get a cheap car loan?
The different types of auto credit offered on the market
The car loan comes in several forms:
- The most common car loan is an “earmarked” consumer loan, the contract of which specifies what the capital must be used for: the use of funds must be justified by the beneficiary. This type of loan is granted more easily, and generally at a better rate, than the conventional personal loan while being more protective since the credit can be canceled if the sale does not take place (absence of delivery, defective model).
- The personal loan remains of course a possibility for the borrower, especially since the flexibility in the use of the funds makes it possible to cover other financing needs such as work or a difficult end of the month. But it must be reimbursed whatever happens, even if the purchase of the car is not concluded, since the capital is not affected …
- Some automobile brands offer zero-rate loans in their dealerships, or payment facilities that take the form of interest-free loans: the monthly payments cover only the amount required for the purchase of the vehicle, plus administration fees and costs. ‘insurance. However, these loans are “captive” because the beneficiary can obviously only buy a car of the corresponding brand.
- Dealers and manufacturers have developed leasing with rental with option to purchase (LOA), an offer which makes it possible to finance the use of a car via the payment of rent and to be able to definitively buy the vehicle (or not) at the ‘ after the term of the contract.
In all cases, the amount of a consumer credit cannot exceed $ 75,000, regardless of the model purchased. If the desired vehicle has a purchase price above this limit, it will be necessary to supplement the car loan with a personal contribution or another loan. In addition, the repayment period is limited: from 3 months to 7 years.
Is there a “good time” to get a cheap car loan?
Credit institutions determine the rate of the car loan by analyzing the level of risk for each borrower profile, and in particular the debt rate: the share of income which is already devoted to the repayment of previous loans. Therefore, if the applicant has more than one loan outstanding, it will be more difficult for them to obtain a new low-cost loan. It is therefore better to wait until you have closed the old credits before signing another.
In addition, if the car loan is contracted in the same establishment as the preceding credits, it is probable that the adviser will carry out a preventive verification … This is why it is advised to be up to date with the payment of all his monthly payments at the time of the request!
A car loan is less expensive than a long-term rental
Many individuals are tempted by new forms of mobility such as long-term rental or rental with option to purchase, in particular because the monthly rental payments are lower than the monthly repayment a car loan.
But alas, the formulas contain expensive services (maintenance package, insurance against financial loss in the event of theft or destruction, all-risk insurance) which significantly increase the bill in the long term. In fact, beyond a certain number of months, buying a vehicle with a conventional car loan almost always becomes cheaper than renting.