Are you considering the purchase of a new car, but do you (just) not have enough financial space to pay for it in one go? Borrowing money is then an option. Of all 10 cars sold, almost 7 are (partly) financed by a loan.
You can borrow money in different ways: from the car dealer, your own bank or from a lender. Curious as to whether it is wise to borrow money for a car and what the advantages and disadvantages are? In this article we tell you everything about financing cars and how you can do this most cheaply.
- Financing a car at the dealer
- Borrow Money From The Bank
- Borrow money online
Financing a car at the dealer
It seems so obvious: take out a loan where you buy the car. Your car dealer. A loan through the dealer is indeed easy, everything goes through one portal. But the interest rates through the dealer are considerably higher than at the bank or the lender.
What are the different options and what should you look out for?
It is common to take out car loans as a ‘hire purchase’. In that case, your dealer will remain the owner of the car until you have fully repaid the loan. If you do not pay back or if you do not keep to the agreements, the dealer can simply put the car back in the showroom.
Purchase by installment
If you choose to purchase on installment, the car will be yours immediately. However, the interest rate is high with this form of loan and the term can be long. What is the biggest disadvantage? By the time you have paid off the loan, the car may already be so old that you can no longer resell it.
Private lease is an alternative to installment payments. You drive a (new) car for a fixed amount per month and you have no maintenance costs. This form of car financing is becoming increasingly popular, although the costs are high.
A third option is the well-known 50/50 (fifty-fifty) deal. You pay very little interest on the first half of the loan. You pay the second half after an agreed period. The advantage with a 50/50 deal is that you pay little interest. The big disadvantage, however, is a high fine if you are unable to pay off the second half.
Borrowing from the dealer entails a number of disadvantages. Many customers feel uncomfortable talking to the dealer about borrowing money. Moreover: if you have to indicate in advance that you cannot pay for the car yourself, you will never receive the best price or the maximum discount from the dealer. You have no negotiating space on the purchase price, a higher trade-in value or accessories.
Borrow Money From The Bank
Would you prefer a loan through your own bank? This option is often chosen because it feels familiar to borrow from the bank, where your account has been running for years.
But do you decide too quickly and are you mainly looking for the convenience and the familiar feeling? When borrowing from the bank, you are still more expensive, due to the overhead costs of traditional banks.
Borrow money online
A loan through an online lender appears to be the most cost-effective and sensible option. The Dutch Credit Company has a specialization in consumer credit. We also use an online method only and can therefore offer your loan cheaper. You can quietly compare which loan suits you best and how much you can borrow. The interest rate is a lot lower than with the regular banks.
At Good Finance you can finance your car through a Personal Loan or Continuous Credit. We will explain below which loan type is more sensitive.
Personal loan or revolving credit?
With a Personal Loan you borrow exactly the amount you need. Then you immediately start paying off, based on a fixed monthly amount. Accelerated repayments can and are free of penalties with us. A Personal Loan is the most secure and economical way to have the amount available for your car within 2 working days:
- Fixed amount per month
- Fixed duration
- Fixed interest
- Always be able to pay extra without penalty
With a Personal Loan you see your debt shrink every month. You cannot withdraw an amount of money within the loan. A safe feeling, because you will not be tempted to build up an extra debt.
With a revolving credit, the interest is not fixed. If interest rates rise, you pay less and the term becomes longer. In this way, a residual debt risk can even arise: the car is then worth less than the outstanding debt.