5 tips for car loan

  1. Use cash payer discounts
    Use a merchant-independent loan instead of financing from merchants or auto banks. So you can pay cash when buying a car and benefit from discounts. Although the dealer credit offers low interest rates for current models, but often higher purchase prices and rigid guidelines.
  2. Compare loans
    With offers from different banks, you can find the most suitable car loan for you.
  3. Increase creditworthiness
    For example, use a second borrower. Additional collateral can increase your credit rating.
  4. Stay flexible
    By keeping special repayments and payment pauses open, you remain flexible during repayment.
  5. Include required insurance
    Car banks often demand a fully comprehensive insurance for the vehicle. This brings further costs.

With the large selection of car loans, it is not easy to keep track. Every second new car is purchased with the help of a loan, in used cars it is more than a third. How do you recognize a cheap car loan? We explain it and show you how to find it with our loan calculator. This will take you to your new dream car without unnecessary additional costs.

How to find the cheapest car loan

How to find the cheapest car loan

Do you know what makes a car loan cheap? Compared to other uses, the biggest cost hurdle for auto finance is not always the interest rate – it’s hidden in the cash payer discount. This discount is possible if you choose a direct bank.

Car loan from a direct bank

A car loan directly from a direct bank can offer you many advantages:

  • Benefit from the cashman discount
    If you use an independent car loan, you can have the loan paid out in cash. With the dealer you can negotiate a discount for the cash payment. With the discount, the purchase price drops, so you need less credit. And with a smaller loan amount you have to pay less interest!
  • Free choice of the bank
    Car dealerships usually cooperate with just one bank or directly with the automaker’s bank. You have no choice. With a free loan, however, all credit institutions are open to you. So you can choose a car finance with the biggest interest advantages and the best conditions.
  • Keep special repayment open
    Loans via a car bank usually do not provide for special repayments or installment breaks. With the dealer credit you are so inflexible, if you pay the loan unexpectedly prematurely and so could save interest, or if you have payment difficulties!
  • No mileage limit
    The car loan independent of the dealer is earmarked and finances the car without further conditions. Merchant loans, on the other hand, often have a mileage limit anchored in credit terms. This is especially true for so-called 3-way or balloon financing. If you get over this limit, you have to dig deep into your pocket again!
  • Lower credit costs
    Through a credit comparison, you can opt for the cheapest offer from a bank. Thus, you reduce the credit costs significantly. At the same time, the independent loans are usually cheaper anyway, as they are earmarked as motor vehicle loans and the bank uses the vehicle as collateral.

Duration of a maximum of 5 years

The chosen repayment term not only influences the monthly installments, but also the interest rates: cheap car loans are available with terms of up to 5 years (60 months) because the risk of repairs and expensive maintenance is lower here. So if the vehicle is needed as security, the financier has greater chances of compensation without discounts, for example due to previous damage or the like.

Benefit from cash payer discounts

Anyone who has ever spoken with a dealer about the purchase price and financing offers, knows the fundamental problems of this type of financing: They are practically only for a limited period, for current models with special features or only if you give your used car at the same time in payment.

However, the favorable interest rates of the car dealers can have a catch: the dealer must give the financing Autobank again a security that the contract is fulfilled. If in doubt, he beats the risk on the purchase price, which you can no longer negotiate in this variant. Keyword here is the already mentioned cashman discount.

The situation is different with regard to financing – whether credit or regular installment credit – through independent institutions that identify you as a cash payer. Experience shows that you can negotiate larger price discounts, especially with predecessor models or standard equipment. Depending on the amount of the purchase price, this discount then exceeds the cost of the cheaper alternative via the car dealer.

Example calculation: dealer credit vs. car loan

A sample calculation illustrates the saving potential. For this, the assumption is that you want to finance a car for a purchase price of 15,000 euros. For this, exemplary interest amounts are selected.

  Manufacturer’s Autobank Independent direct bank
Purchase price of the car 15,000 euros 15,000 euros
Negotiated estate 0 percent 10 percent
Net loan amount 15,000 euros 13,500 euros
Effective annual interest rate 4.5 percent 5.25 percent
Duration of financing 48 months 48 months
Monthly Rate 341.44 euros 311.68 euros
Total cost of financing 16,389.28 euros 14,960.51 euros
saving   1,428.77 euros

As you can see, the monthly charge is approximately 30 euros below the comparable offer of the manufacturer’s Autobank. Thanks to the cash payer discount, savings of over 1,400 euros were achieved here. You can invest this money in new equipment details or use it as a back-up for repairs.

Calculate cash discount

Requirements for a car loan

To apply for and receive a car loan, you must meet these conditions:

  • Age : You must be at least 18 years old to use a car loan.
  • First residence in Germany : You must live predominantly in Germany and have your first residence here.
  • German Account : Your account must be held at a bank in Germany.
  • Regulated income : You must have a regular income. Depending on the bank, this can be income as an employee or self-employment.
  • Creditworthiness : Your credit rating must be sufficient for a bank to grant you a car loan. As a rule, a credit report is therefore carried out. Frequently, credit providers still want additional protection in the form of insurance (eg, residual debt insurance) or capital investment.

In 5 steps to auto finance

In 5 steps to auto finance

If you have decided to buy your new car not only from the savings, the process is usually the following:

Choose your desired car

First, you should ask yourself if you want to finance a new or used car. Used cars usually have the advantage that they are cheaper than new cars. On the other hand, you will have to reckon with repairs or replacement of wearing parts during the runtime. It is advantageous if the car dealer gives a warranty on the used vehicle, similar to what is common with new cars.

  • Price comparison : Check before financing the vehicle, if there is the same or a similar model at another dealer cheaper. For used cars, also use a price comparison on the Internet.
  • Additional costs : When choosing a vehicle, also consider other factors that influence the fixed costs for the vehicle, such as displacement, fuel consumption or loss of value.
  • Make and model: After the question of new or used cars, you decide on a car brand and a corresponding model. Take into account where your actual need is. Does it really have to be the SUV with a lot of horsepower, for example, or is an economical combination enough?

Make a household bill

If you have decided on a car, you should consider your economic circumstances. Take the statements of the last six months and break down each revenue and expenditure. Unscheduled payments should be taken into account, bonus payments are to be calculated out. The difference shows you how high your monthly installment may be.

Choose the cheapest way of financing

For the financing of the car you have various options to choose from. The following table compares all the important aspects of common credit options for you:

  car loan leasing 3-way financing
  • Paying cash discount
  • unscheduled
  • No mileage limit
  • Low monthly costs
  • Easy return
  • Lower rates compared to Installment purchase with same duration
  • Rates higher than with 3-way financing or leasing
  • Car remains the property of the leasing company
  • No assets are being built
  • Seduced to low eradication
  • Interest rate risk on follow-up financing

According to a study by GfK’s market researchers, in 2016 around 71 percent of financed cars were financed via a classic installment loan. 17 percent opted for 3-way financing, while 20 percent opted for leasing. Only two percent had opted for a different form of financing in 2016.

Have the necessary documents ready

  1. payslips
    When you work in a job, banks usually need your last pay slips. This will show you regular income.
  2. Bank statements with salary receipt
    In addition to salary statements, some banks require the bank statements of the last three months. This applies in particular to employees or trainees.
  3. Registration certificate Part 2 of the vehicle
    The registration certificate confirms that you own the vehicle. Sometimes only one copy is necessary. However, if the vehicle is transferred to the bank as part of a security transfer for the duration of the car loan, the bank will need the vehicle registration document.
  4. tax bills
    Self-employed or freelancers, who do not receive their income through employment, must use current tax assessments to prove what they earn. Often tax assessments of the past three years are required.
  5. BWA – Business evaluation
    When self-employed people apply for a car loan, banks usually require an additional BWA. This applies in particular if the most recent tax assessment date is older. The BWA is usually created by a tax consultant.
  6. Security agreement
    Some banks conclude a separate contract for the transfer of ownership of the vehicle. This contract is then part of the loan agreement.

Credit payment and car purchase

  • Disbursement: If you opt for a dealer-independent car loan, this will usually be paid out within a few working days. The prerequisite is that the bank accepts your application and you fulfill all the necessary conditions. You can then cash out the loan amount directly at the bank and buy the car.
  • Buying a car: Take advantage of a dealer-independent loan and trade with the car supplier. Often discounts of up to 30 percent compared to the list price are possible. Also, try to haggle for optional equipment or a warranty extension for new cars. As a cash payer you usually have clear advantages in all negotiations.
  • Admission and insurance: After the purchase you must allow your car. Many car dealers are taking over this service for their customers. Regardless of whether you allow the car yourself or hire your car dealer, you need valid insurance cover. Register your new car with an existing car insurance company. Or take the advantage of changing vehicles to find cheaper insurance. Carry out a car insurance comparison for this. The eVB number after the promise of the new insurer is then required for the registration.

Use alternatives to residual debt insurance

The residual debt insurance is designed to ensure that the loan can be properly fulfilled, should you fall ill or lose your job. However, such insurance costs accordingly, so they increase the actual cost of the loan. Apart from that, there are waiting periods, so the insurance does not start until after a certain time and has its own definitions of when you are considered “sick” or “incapacitated for work”.

An alternative, therefore, is to bring in eligible investments. Term life insurance or disability insurance can normally be ceded easily to the financing bank.

Useful additional information

Useful additional information

There are many more things to remember about car loan. Here you will find everything you need.

Beware of the three-way financing

Caution is advised when car loan with closing rate, also referred to as three-way financing. In this case, the financing is built up similar to a lease. They make a down payment, some even without offers, and pay a low rate over a period of three or four years.

At the end of the financing, the balloon must be paid, the final installment, which regularly accounts for more than half of the vehicle’s value. However, this depends on the recoverable residual value, which often leads to disputes between traders and buyers. Because even if you return the vehicle, it can still come to an open balance. In this case, you pay for a vehicle that is no longer in your possession.

Check the indicated residual value

Explain in detail the evaluation features of the three-way financing and check the declared residual value by independent experts. Automobile clubs and rating societies keep a list of each model type and make, based on actual sales values.

Check insurance requirements

An additional point that comes into play when financing via car banks, is the insurance condition in the contract. Typically, the dealer will require you to cover the vehicle with a fully comprehensive insurance against any possible damage. Because first the total loss occurs, is also the security for the car financing away. Of course, this will increase the actual cost of the vehicle, which you should consider when comparing.

In the case of independent direct banks, it has meanwhile become customary to dispense with sending the vehicle registration documents. You then only have to submit a copy of the registration certificate Part II and thus have little bureaucracy.

Saving with the insurance possible

Some contracts provide for borrowers, vehicle owners and policyholders to be the same. In more and more tariffs, however, the banks deviate from this regulation. Thus, the financing can run on the woman, as a vehicle owner but the man is registered. Gambling with percentages and other discounts on insurance is possible. The only requirement is that then the woman is in the vehicle registration.

So widespread is the car financing in Germany

According to figures from the German Automobile Trust, more than half of consumers in Germany use a loan for new car financing. Partial and full financing is taken into account. Around 20 percent of consumers opt for leasing new cars and only a quarter pay for the new car without credit.

In the used cars results in a slightly different picture. In Germany around 40 percent of this is partly or fully financed. Only two percent of used cars were leased in Germany in 2015. Around 58 percent of car owners have bought their used cars without financing.

Questions and answers about car loan

Questions and answers about car loan

What is a car loan?

A car loan is an earmarked installment loan for the financing of a new or used car. With a car loan individuals get a loan, which they pay back in equal amounts (installments).

Why are Autobank loans often expensive despite low interest rates?

Many of the dealer-brokered auto loans are tied to specific models or features. You can then only take advantage of the offer for a limited time. At the same time, however, you are not a cash payer, because the dealer and the car bank are linked. This means that the trader takes over part of the risk for you. Therefore, dealers can even offer zero-percent financing, because the higher purchase price, the dealer recovers the self-borne interest rates. But since you can negotiate just with old models or vehicles in need of repair, higher interest rates via direct banks are no problem (see example calculation above).

Are used cars just as easy to finance?

For used cars, most banks make no difference, because here too the vehicle is included as security. Only in the application, more information must be made, such as the mileage, the first registration and the like. In practice, the limit is often 10 years, even mileage over 250,000 are problematic.

Car loan and car leasing, where are the differences?

In the classic car loan, the granting of the loan amount is linked to the purchase of a car, that is, earmarked. The registration certificate Part II serves as collateral, while interest rates are lower than for classic installment loans. The vehicle is in your direct possession, for example, you can easily sell the car or change the owner.

In car leasing, on the other hand, the vehicle is left for a certain period of time, often between three and four years. It is, so to speak, a car rental. For lessees, the leasing rates are deductible, which is why this capital-conserving option is often chosen for models of the upper class. You pay for the loss during the term, so the installments are higher in the loan financing. If the car is returned at the end, it may be that after mileage, minor scratches and the like, a high additional payment threatens. In addition, the requirements for the motor insurance are high (fully comprehensive), you also bear the risk for repairs.

Which types of loans are customary in car financing?

The three-way financing (balloon loan), however, is a mix of installment loan and leasing. Very low monthly rates are followed by a high final installment, in some cases a down payment has to be made. Interesting for those who expect a larger payment within three or four years and then finance the balloon from own funds. Since much of the loan is paid at the end, the interest rate in the monthly installments is correspondingly high.

What are the advantages of applying for a car loan online?

A car loan is always earmarked, in which case you indicate the vehicle as collateral for the financing. Compared to the classic installment loan, this sometimes entails enormous interest advantages, because the credit rating plays a lesser role in the application process. The online comparison summarizes all matching offers, first independent of one’s own credit rating. This gives you an overview and allows you to compare whether, for example, special repayments or installment breaks are possible.

When is a car loan the best car financing?

A car loan is suitable in the following cases:

  • You can not afford your car finance in cash, but you want to become the owner of a vehicle. In this case, the car loan with consistent rates, direct commitment and foreseeable term is just right for you.
  • You want to save the interest on the dispo. If you use your Dispo, you pay very high interest rates (up to 17.50 percent). A car loan can reduce your interest costs by up to 80 percent.
  • A car loan can be made more flexible than a lease contract. Lessees are mostly business people because they can deduct the high cost of leasing tax deductible. As a private individual you can take advantage of a car loan: First, you acquire the car as a property and thus has the opportunity for a possible sale. Furthermore, you can get a car loan without Private credit.

Can I cancel the loan at any time?

Yes, you have the right to repay a installment loan early, eg by taking out a cheaper loan from another bank. However, the loan processing fee paid by you will not be refunded by the relieved bank. During the agreed interest fixing period / loan term you can terminate the loan at the earliest 3 months with a notice period of 3 months and repay the outstanding loan amount due to the legal regulations.

You can also repay partial amounts at most banks during the agreed term, so-called special repayments. In these cases, the monthly rate remains the same and it shortens the term.

The financial institution also has the right to terminate the loan. This happens after two written reminders for two consecutive, unpaid installments. The borrower has three months to pay the debt. As long as you pay off the loan, the vehicle papers usually remain with the bank.

Is only a condition request carried out?

Inquiries made via our credit calculator are treated as “request credit terms” at Private credit Your advantage: This is not visible to every other bank.

For other providers, your request may be stored as a “loan request” at Private credit, which means that it can be viewed by any other bank or corporation, which could lead to disadvantages for the prospective buyer the documents of the Private credit is, that means that no credit has been granted – that you as a customer but only for the loan conditions has interested, let alone whether you would have been accepted or rejected, does not emerge from this entry.

What is the level of the monthly rate?

How much you have to pay monthly for your car loan depends on several factors:

  • Cash payer discounts : The more discount you get on the vehicle when paying in cash, the cheaper the credit will be. Because you can use the money saved as a rule immediately as a special repayment.
  • Special repayment options: The more unscheduled repayments you can realize, the cheaper the monthly installment will be. This is the case when the loan is recalculated over the entire term.
  • Remaining debt insurance: A residual debt insurance can significantly increase the monthly installment. Therefore, check in advance whether this option makes any sense for you.
  • Credit : The higher your credit rating, the lower the credit costs, as you will have to pay less interest on your loan. In order to increase the credit rating, it is therefore often advisable to take two borrowers into the loan agreement.
  • Term: The longer the loan contract runs, the more interest you have to pay and the more expensive the loan will be. However, you can reduce the monthly installments by a longer term.
  • Annual percentage rate: the higher the interest rate for the same duration, the higher the monthly rate. This factor is especially important in the credit comparison.

What happens if I can no longer pay the loan?

If you are no longer able to pay the installment of your car loan, it is best to contact the bank at which you have taken out the loan or lease contract early on. It is recommended that you already inform the bank before a due installment could not be debited. In this way, it is possible to talk to the customer service of the bank in order to possibly receive a short-term installment delay.

If leasing or credit installments could not be deducted from your account, the lender or lessor will contact you directly. Usually, the rate is posted a second time after a first failed attempt.

From a certain number of defaults, the bank has the right to collect your vehicle, because usually the car serves as collateral. When this security can be claimed will be specified in the loan agreement. For this reason, you should read this contract in advance to avoid unpleasant surprises. Because even if the lender has collected the car, the credit continues to run and the open installments must continue to be paid.

I need the loan urgently. Is there a way to get the payout faster?

Usually, it only takes between four and six business days from the application to the payment of the car loan. You can speed up the process yourself by completing the loan application and settling all necessary documents immediately. In some cases, the loan payment can also be made faster if you visit the bank branch directly. For direct banks, however, this possibility is eliminated. Another way to speed up the process is the legitimacy by videoident method. In this case, you can legitimize yourself directly online and do not have to carry out the identification in a post office via PostIdent.

But more importantly, you do not rush to make lending decisions despite the time. Keep in mind that you are committed to paying a fixed rate with a car loan over several years. Before borrowing, make sure that you can service these rates. Also, compare different loan offers to find the cheapest car loan.

How much credit can I get from the car loan?

The deciding factor for the possible amount of credit, as with any loan, is your free disposable income. In addition, your credit rating has an impact on the lending and the amount of the possible loan. In a dedicated car loan, however, the financed car itself plays an important role, because it usually serves as collateral. Thus, it is foreseeable that a bank in a new car generally granted a higher credit than a used car.

Which interest is decisive in the comparison?

The nominal interest rate indicates the interest you have to pay each year for your loan. This interest rate is based on the net loan amount and has an impact on the amount of the monthly loan installment.

The effective interest rate includes the nominal interest rate and also takes into account all possible ancillary costs of the loan such as processing fees or payment costs

Therefore, always pay attention to the effective annual interest rate for the credit comparison because it takes into account all borrowing costs incurred. For example, an offer may appear attractive at first sight due to a favorable nominal interest rate. If, however, the effective interest rate is specified, the supposedly cheap loan offer can become significantly more expensive and no longer the best.