The Real Price
So you decided to buy a car. Like many buyers, you need a loan to pay the car, even if it is a second-hand car. Of course you do not want to waste money unnecessarily in that situation. Therefore, do not blindly opt for a standard loan and make a well-considered choice.
To start a loan for the car you have chosen, it is best to first consider how much the car will cost. Do not forget the additional costs such as taxes, insurance, maintenance and even fuel. That way you know where you start and what you need.
With a car loan you can usually borrow more than the purchase price of the car itself. That is why you may want to borrow enough, so that you will not be left without money and therefore can not even use the car.
Pay An Advance
Paying a car in full is not an easy step. It takes a lot of time to save more than € 20,000 or even more than € 30,000. Even if you have enough money, it is not so nice to spend it all at once. This is how you lose your buffer. It is always useful to have a reasonable sum of money for when you really need it.
Fortunately, it is often feasible to pay an advance. That is in the ideal case about 20% of the total amount. With a car of € 26,000 (including the previously mentioned extra costs) you pay € 5,200 in advance. You borrow the remaining € 20,800. You do well to compare all car loans and choose the most advantageous.
With a car loan of € 26,000 at an interest rate of 2.50% with a term of 36 months you can, for example, choose between the following options:
· You do not pay an advance and therefore have to pay € 27,003, or € 1,003 more than the purchase value of the car.
· You opt for an advance of 20% and ultimately pay 21,602 for the loan plus the advance of 5,200, ie a total of 26,802.
With the advance you save € 201 on the loan.
Another important advantage of an advance is the certainty you have. You already own a larger part of the vehicle. In case of an accident, the chance is greater that your insurance covers the entire loan, so that you are in any case relieved of the responsibility to continue paying the loan.
The only downside of an advance may be that you temporarily have less financial space. That only applies to people who are already under tight cash. The danger is then that you still need a loan or credit to make ends meet, so that you pay more than if you do not take an advance. It is therefore important to know exactly how you stand before you take an advance. It is up to you to determine how big the risk is that you will need urgent money in the coming period.
Use Credit For An Advance
There are different ways to pay the advance. Think of a simple bank transfer or a credit card. Your limit must be high enough to pay the advance with credit. The advance is also only advantageous if you have enough money in the bank. If not, you can better go for a loan of the total amount.
For example, if you choose to pay the advance with your credit card and do not have enough money in the bank, then interest comes on top of the amount used. The amount that you then have to pay extra will be higher than the saving of the advance.
Advances are a smart way to save on your car loan. You have more security and the loan is cheaper. Only if you can not pay the advance, it is of no use to finance the advance in an alternative way. For those who have just enough money, the risk is perhaps a bit too big and good planning is crucial.