The car loan promises the smallest current installments with a high final rate. This car loan can be suitable for new vehicles as well as good used ones. Nevertheless, anyone interested in a final installment loan should not make their decision too easy. There is a lot of showmanship involved, especially when it comes to car loans, such as those found on dealers’ boards.
Car loan with a high closing rate – the typical dealer loan
Car sellers are facing increasing sales problems in Europe. Unlike in Asia, wage developments have not kept pace with price increases. For reasons of reason, buying a new vehicle is therefore out of the question for many. The industry tries to counteract this with zero percent financing and a car loan with a high closing rate.
Only those who take a closer look at the loan offers will recognize the possible risks. First of all to the people for whom such funding is worthwhile. Of course there are also.
For whom are final installment loans worthwhile?
Final installment loans as three ways of financing are worthwhile for people who always want to drive a new car. With this financing, car buyers have to be careful not to underestimate the current rates. The three-way financing allows the vehicle to be returned to the dealer when the final installment is due. You can also continue to finance or pay for the vehicle. Anyone who wants to drive a new car must compensate for the loss in value through their ongoing installment payments. He then returns the vehicle to the dealer, the down payment is also retained due to the higher installments. The customer then drives off the farm in his next new car.
Incoming payments expected in the future, for example an allocation contract that is ready for allocation, can make the final installment loan useful. The loss in value is offset with the current installments and the down payment. The final installment is paid with the savings contract. Using the vehicle early is still more expensive than waiting, but it makes sense.
When does a final installment loan become a risk?
The car loan with a high final rate is becoming a problem for people who rely on the lowest installments when buying a vehicle. With their down payment and the current installments, they only compensate for the actual loss in value. They also pay the interest on the deferred final installment. They do not make a real deduction.
The whole thing becomes a risk when the final installment is due. Unlike the three-way financing, the vehicle cannot simply be returned with a normal final installment loan. Furthermore, further financing is by no means guaranteed. If the car bank gets involved at all, then on extremely changed terms. In many cases, however, no provider wants to get into further financing. The reason for this is that the vehicle’s lending limit has been exceeded. Either private money can be added, about 20 percent of the final rate, or there is no follow-up financing. The car loan with a high final rate can quickly become a pitfall.