The first car is an important milestone on the way to a self-determined and mobile life. Even at a young age, however, there are still few financial reserves available to finance the purchase of a car. What is needed is a loan for a first car. Here are some hints, what you should consider.
Check financial margins
Each loan is linked to interest and repayment obligations. This also applies to the credit for a first car. Before deciding to buy a car, you should therefore consider whether you can actually afford to borrow. Otherwise you should reset your request. Shortly before the start or at the beginning of professional life, the financial scope is often very low, so that must be exactly calculated here.
You can easily carry out such a check by means of a household bill. The regular income is compared with the expenses incurred. Only if, after deducting the cost of living, rent and insurance, you have enough left over monthly for the maintenance of the car and the payment of credit installments, a credit-financed purchase is responsible. Possibly. To reduce the need for credit by purchasing a cheaper used vehicle.
What to do if there is no credit rating?
To get the credit for a first car, you usually need a steady income. Otherwise, borrowing will be difficult. Especially young people who are still in education or studying, but often do not have secure financial conditions. You may be able to overcome this hurdle if others vouch for you with appropriate credit requirements. Often parents, sometimes other relatives or friends are ready for it. They then stand by with their credit rating for the credit service and lenders are ready to lend.
Credit for a first car: an overview
Car loans are usually typical installment loans, meaning that interest and principal payments are made over the agreed period in constant monthly installments. The interest rate is fixed over the term. In the case of car loans, the loan amount and the term are calculated in such a way that the car is financed and fully paid at the end.
With the choice of the term, the monthly rate can be influenced and adapted to the financial capacity: the longer the term is chosen, the lower the rate and vice versa. Most banks, manufacturers or retailers offer different runtime options.
A special variant is the so-called balloon loan: Here a high final installment is agreed, but the current installments are lower. Sometimes, at the end, the car buyer can choose to pay the final installment, extend the loan, or return the car and finance a new car. Such loans are mainly offered by dealers and manufacturers. As a rule, conventional car loans are cheaper.
Credit from the dealer / manufacturer or the bank
The credit provider usually has the choice between bank financing or financing through the dealer or manufacturer – usually with the involvement of a car bank. Traders or manufacturers often advertise with particularly low interest rates, often zero-percent financing. The banking system, however, seems more expensive, even if the bank car loan, the interest is often lower than the normal installment loan, since the vehicle serves as security.
The corresponding hedging instrument is the so-called security transfer. This means: the lender is the owner of the vehicle until full loan repayment, this is formally ensured by the deposit of the vehicle registration document. Nevertheless, you are an owner and can use the car as your own. With complete loan repayment, it then becomes your property.
Not just compare interest rates
When comparing conditions, you should definitely pay attention not only to the interest rate. With dealer or manufacturer financing, you can not act as a cash payer and negotiate discounts, and you may also be tied to specific brands, models, or promotion periods. With a bank loan, on the other hand, you have the greater freedom of choice and discount margins. The bank loan for a first car can therefore be the cheaper solution, even if the interest rates are higher. Good comparison computers on the Internet offer opportunities to calculate different loan offers taking into account the discount margins.
In addition to the credit costs you should not neglect other conditions for credit for a first car. They are often found in the ‘fine print’. Options for rate adjustments or suspensions are also included, as are the conditions for special repayments. They can be important if the finances are different than planned.
With good planning and preparation, the credit for a first car should not be a problem, but open up new freedoms and perspectives.Compare now