In this day and age, a loan for used car purchase is used more frequently. This is due to the currently very low interest rates. And a car is usually the most expensive commodity. And a used car is not cheap.
Credit for used car purchase – there are these possibilities
A used car purchase loan can be taken in different ways. So one can choose the classical financing, which are offered today beside the house bank also by the autobanks. The difference here is that you make a down payment at the car bank and the balance is repaid in equal monthly installments, while the house bank pays the entire amount and you pay the car in full. The loan is then repaid to the bank via monthly installments.
Another variant of the credit for used car purchase is the so-called three-way financing. Here you have a low down payment, low rates and high flexibility. At the end of the term then the final installment is due, this is between 25% and 50% of the vehicle purchase price, or you choose a follow-up financing or returns the vehicle just like it is the rule for leasing.
Advantages and disadvantages of a loan
A loan for used car purchase offers the advantage that you do not have to pay the full price when buying a vehicle and you are financially more flexible. However, the credit for used car purchase also requires a higher total. Because in addition to the purchase price you have to pay interest to the bank.
For offers of 0% financing it looks different. Here the costs remain the same, since no interest from the bank is required. So there is an even higher degree of flexibility. You do not have to pay the vehicle price directly and can thus create the savings (the interest)
One should generally ask yourself before taking out a loan, not just on the used car purchase loan, what happens when you can no longer afford your obligations to the bank, whether due to illness or job loss. Here it is advisable to conclude an insurance tailored to these events. This so-called residual debt insurance assumes the installment payment for the duration of the event.
One should not choose the monthly rate too high. This leads to more flexibility and gives you some leeway and the opportunity to save money for bad times etc. The best way to know the monthly installment is to create a household book and compare and compare all monthly income and expenses of all family members. The sum remaining at the end is the maximum value of the loan installment. But one should take into account that a car causes running costs for its maintenance. These include above all the insurance premiums, which are incurred even if the car is not used.
Furthermore, this includes costs for fuel and maintenance. Also, an unforeseen repair can happen again and again, which is why you should still put a sufficient amount of the available monthly income on page. Now, taking into account all costs and eventualities, you can see what monthly rate is possible. Before concluding the contract you should also think about the terms.
Short maturities have the advantage that the loan can be repaid quickly, but relatively high rates are to be paid here. With lower rates, the runtime is longer, but you have more financial leeway. Basically, you should choose a loan as long as possible to keep the monthly burden low.