On the one hand there is the classic installment loan, in which the loan amount is fully financed and repaid during the term, and on the other hand there is a car loan with a final installment. Only part of the loan is repaid here during the term. At the end there is a final installment that can either be redeemed in cash or refinanced. Another option can be to return the vehicle to the dealer. Then the financing model is called three-way financing.
Advantages car loan with final installment
While the final installment financing was only occasional at some retailers in the early 1990s, it is now an integral part of the financing offers because the type of financing has become established among consumers. The final installment at the end of the loan term does not have to be repaid during the term, which makes it possible to finance higher-value vehicles and still be able to afford the monthly rate. Small installments, even with more expensive models, make final installment financing really attractive for many customers.
This type of financing is chosen by borrowers whose monthly income is lower, by students or trainees, but also by families in which a second car is to be financed. In principle, final installment financing is more expensive than traditional installment loans, so borrowers must always expect higher borrowing costs. Nevertheless, a loan comparison is also worthwhile here. Depending on the manufacturer, the conditions here also differ. The car loan is now being offered at the final rate not only by the car banks of the manufacturers, but also by manufacturer-independent car banks such as the Agree Bank and carcredit.de. Because it is more expensive to finance a car with final installment financing, the loan comparison is particularly important, because it can also save credit costs.
If the rate is not a top priority when it comes to vehicle financing, car loan with the final rate is not necessarily the first choice. Since the financing offer usually comes from the dealer, you not only have to pay higher interest because it is a final installment financing, but you also miss the chance of a higher vehicle discount. Discounts of 10 to 20 percent can usually only be negotiated if car financing from the Group’s own car bank is not used, but if you come to the dealer as a cash payer.
In order to appear as a cash payer, you don’t really have to be a cash payer, you have to apply for the loan through a third-party bank. As soon as a dealer does not have to participate in any way in the subsidized interest, he is ready to grant a discount on the vehicle price, which can usually be used to offset higher credit costs.
Promac car loan with final installment
Only the small rate speaks for the financing model. Otherwise, this type of financing is expensive and uneconomical. Because not only that higher loan costs arise during the term of the final installment financing, but in the end the final installment will also continue to be financed. A new loan agreement is concluded with new costs. If you then add up all the costs incurred at the end, the vehicle price is significantly higher than what the normal financing costs. Before consumers decide to take out a car loan with a final installment, they should consider the total cost.