Those who buy a car these days rarely have the opportunity to pay in cash. The majority of purchases for both new and used cars are now financed. If you want to take out a loan for your car, you have several options. In addition to classic financing through the dealer, there is also the option of applying for a separate loan for the car.
Dealer financing is simple but not always cheap
Many car buyers still use so-called dealer financing. This is primarily due to the simple and uncomplicated handling. The buyer receives all services from a single source and does not have to take care of a loan for the car. In addition, many manufacturers lure with low interest rates for appropriate financing. The disadvantage of this, however, is that the dealer usually no longer has the option of granting his customers an additional discount.
The retailer has to pay the corresponding advertising costs for the low-interest loans from the manufacturer’s bank. However, if the customer takes out a car loan from a foreign bank, he can act as a cash payer towards the dealer and thus negotiate very attractive discounts.
Compare funding options
To determine the best financing for buying a car, you have to compare the different types of financing. First of all, you should, therefore, have the dealer make you a financing offer. The buyer can now use a credit comparison to search for alternative financing. Direct banks in particular offer a large number of cheap loans for buying a car via the Internet. It is important to pay close attention to the effective annual interest rate, since this includes the processing fees in addition to the actual interest.
The amount of the interest rate mostly depends on the amount of the loan and the chosen term. For this reason, you should always compare loans with the same amount and an identical term. Once you have found the cheapest loan, you can compare it with dealer financing. A separate loan for the car is always worthwhile if the possible discounts are greater than a possible saving on dealer financing.
You should be a little careful if a bank makes the interest rate depends on the creditworthiness of the customer. How high the interest rate is, in the end, can only be said after the final credit check. However, this is usually only carried out when all the necessary documents have been received by the bank. An interest rate dependent on creditworthiness can therefore increase afterward.
Apply for the car loan online
Applying for a loan is no longer a big deal these days. It is sufficient to fill out the credit application online and send it to the bank. If the loan is approved, the borrower usually receives a preliminary immediate approval. He can then usually print out the loan documents directly and then only has to send them to the bank with the necessary documents such as proof of salary. If the subsequent credit check is positive, the loan amount is usually transferred to his checking account after a few days. This is not a major effort, but depending on the vehicle, it can mean significant savings compared to a dealer loan.