Car loan with final installment – small installments
Car buyers are looking for a car loan with a final installment because they want to keep the burden of the current installments low. They receive an offer primarily from the car dealership. The dealer makes the financing with the final rate for new vehicles particularly tasty. It is not uncommon for “zero percent” interest costs to be on the offer board.
Furthermore, depending on the vehicle, dealers even offer different loan models with a final installment.
The offer includes:
- the three ways credit
- a two way funding
- as well as the simple car loan with final installment
Not every car buyer is clear from the start what the different offers include. Many also underestimate the final rate.
Final installment loan – three ways of financing
The motor vehicle trade offers a particularly flexible type of financing for new vehicles. The three-way final installment loan. Funding is basically an installment loan with different installments. During the term, the borrower only pays small ongoing installments. They only have to be sufficient to cover the loss in value over the term. The down payment may even be included in the invoice.
At the end of the term, however, the high completion rate is due for payment. At that very moment, the borrower has a choice.
He can get the car loan at the final installment:
- finally pay and becomes the owner of the vehicle
- it is also guaranteed to refinance the final installment
- he can return the vehicle on request
Decide without commitment – Leasing Light
The free decision about the final vehicle purchase, to keep until the final installment, makes the offer attractive. The three-way financing is therefore often referred to as “leasing light”.
Because also with leasing, the lessee usually has the option of taking over the vehicle at residual value. However, there are also risks involved.
Three ways balloon credit – good reasons against it
The three-way balloon loan, as the 3-way financing is also often called, unfortunately has not only advantages. For example, this credit model is only offered by the car dealer. It is not possible to choose between alternative offers. This is often an expensive limitation. Because, with the external financing of the new car, an average of about 30 percent cash discount is available.
This savings option is only ruled out without the dealer as the vehicle return provider. But there is at least a guarantee of follow-up financing. After all, it excludes the greatest risk in car loans with the final installment. Because the final installment is guaranteed to be financed by the auto bank.
But on what terms? Of course that is not certain.
In addition, there is often an exit clause in the contract. Because if the credit rating for lending deteriorates significantly, then of course the auto bank does not want to grant a new loan either. The “further financing” is also unlikely to be offered without interest or at particularly low interest rates. Because the bank has nothing to give away.
Finally, the car is finally bought as soon as the vehicle owner decides to continue financing.
Final installment loan for car purchase – compare
Saving and small installments for car loans with a final installment are not necessarily realized through dealer credit. Above all, the elimination of high price reductions makes it difficult to save.
In the comparison of interest rates for new cars, dealer credit may even be interest-free. However, the calculator almost always proves that the interest savings – through an additional discount – are more than offset.
Direct banks also offer vehicle financing with a final installment. This means that the small current installment does not conflict with the cash payment discount. It would also be conceivable for a car loan with a final installment from the network for used vehicles. Direct banks make it possible to exploit savings potential through private purchases. If you want to compare your car loan correctly, you cannot ignore these factors. Our tip:
Do not rely on your gut feeling, but use the calculator.
Auto loans with a final installment – with poor creditworthiness?
Poor creditworthiness is mostly based on an inadequate income structure. The salary is just about the month. In addition, old debts often burden the budget. There is therefore no room for large installments in the household budget.
The vehicle financing with a final installment from the dealer seems to have been created for such cases. But that’s only true from the point of view of the car dealer. Because, the small installments just fit into the budget bill. Thanks to a down payment, the loan can often even be approved. This enables the dealer to sell the vehicle to the customer that they cannot actually afford. Unfortunately, the big end follows when the closing rate is due.
Risk – car loan with final installment
If follow-up financing is not guaranteed, it will be bitter. Due to the down payment and small current installments alone, the vehicle value does not correspond to the mortgage lending value.
With a poor credit rating, hardly any bank agrees to take the risk and refinance the final installment. The bottom line is that car buyers with poor credit ratings are generally advised against car loans with a final installment.
Unless the money for the final installment is certainly available. For example, because a savings contract is ready for allocation by the due date.
Otherwise, stay away.
Car loan with final installment or constant installments?
The offer to finance the car by installment loan sounds “old-fashioned” at first glance. Paying the same installments in the traditional way always has clear advantages, especially if your credit rating is poor.
Once the loan has been approved, whether from the network or from the dealer, the topic is finally off the table. Because, only with a car loan with a final installment, the question of how to pay the high final installment arises. Banks offer online car loans with a term of up to 120 months. The term regulates the desire for small installments.
Nevertheless, this is of course not an unconditional invitation to finance for an endlessly long time. Firstly, a new car will also get old, secondly, compound interest makes long-term loans more expensive.
Regardless of whether it is a car loan with a final installment or with constant, constant installments, which loan model suits is not only the small installment.