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Car financing: 7 tips for borrowing money for a car

Looking for a new car, but not enough savings yet? Then car financing is an interesting option. You can finance your car in various ways, for example by paying at the dealer,  borrowing money  from the bank or leasing. Whatever you go for, your chosen car financing must suit you. And not paying unnecessarily much for it would also be nice. Unfortunately, this happens quickly. From that point of view, we are happy to give you seven tips with which you can find the cheapest and most suitable car financing!

1. Choose financing for car

You can finance your car with a loan from the bank, with a car loan through the dealer or by leasing. The table below lists the most important characteristics per car financing.

Personal loan from the bank
Car is really yours
Fixed interest
Fixed term
Fixed monthly payments
Fines-free extra repayments are often possible

 

Financing the car through a dealer
Car is yours only after payment
Higher interest
Longer term
Additional repayments not possible
Strings attached

 

Private lease
Return the car after the lease period
Breaking an interim contract costs money
Damage-free years not always adopted
Only take three damage-free years after the lease period

Car financing: 7 tips for borrowing money for a car

Looking for a new car, but not enough savings yet? Then car financing is an interesting option. You can finance your car in various ways, for example by paying at the dealer,  borrowing money  from the bank or leasing. Whatever you go for, your chosen car financing must suit you. And not paying unnecessarily much for it would also be nice. Unfortunately, this happens quickly. From that point of view, we are happy to give you seven tips with which you can find the cheapest and most suitable car financing!

1. Choose financing for car

You can finance your car with a loan from the bank, with a car loan through the dealer or by leasing. The table below lists the most important characteristics per car financing.

Personal loan from the bank
Car is really yours
Fixed interest
Fixed term
Fixed monthly payments
Fines-free extra repayments are often possible
Financing the car through a dealer
Car is yours only after payment
Higher interest
Longer term
Additional repayments not possible
Strings attached
Private lease
Return the car after the lease period
Breaking an interim contract costs money
Damage-free years not always adopted
Only take three damage-free years after the lease period

Financing a car with a personal loan from the bank

We think it is best to finance your car with a personal loan . You borrow an amount (from 2,500 to 75,000 euros) to finance a car. You will receive the amount to finance your car at once in your payment account. You choose in advance how many months you will repay (the term). This way you know in advance what you pay per month in interest and repayment (monthly installment amount).

Because the car is really yours, you can build up claim-free years and benefit from a no-claim discount on your car insurance. Moreover, nowadays almost all personal loans can be repaid without penalty. If you have extra money to spare, then repay your loan extra and you will save on interest costs.

Pay attention! Financing a car with BKR? That will be a difficult story! It is not only difficult to take out a car loan with negative BKR somewhere. You should also ask yourself whether financing a car with negative BKR is smart at all. This BKR is there for a reason!

Financing the car through a dealer

A car loan with a closing period via the dealer often sounds attractive. Installment purchases and deals like ‘buy now and pay in five years’ seem nice, but always expensive. Either you pay a high interest rate, or the term is a lot longer. Whatever the catch, the fact remains that you are more expensive. Moreover, the car is really yours when the car loan has been paid with a final installment. Is this not possible? Then they repossess your car.

Auto financing with private lease

Financing your car with a private lease also has a number of disadvantages. First of all, the car is not really yours. You return it after the lease period. And if you want to get rid of the contract in the meantime, it will cost you a lot of money. In addition, insurers are not obliged to take over the damage-free years accrued during the lease period. If they do, this will only be a maximum of three claim-free years. The rest is canceled. You will therefore benefit less or not from a no-claim discount.

In our view, financing your car through a personal loan from the bank has the most advantages. The following tips are therefore about the personal loan.

2. Determine the term of the car loan

If you choose a personal loan to finance your car, it is wise to adjust the repayment period of this car loan to the expected use of your car. For example, if you expect to drive the car for a maximum of five years, do not take out a car loan with an eight-year term. You then repay the loan for another three years, while you no longer own the car.

Tip! Also first calculate your maximum loan before taking out the loan. This way you know what you can borrow responsibly in your situation.

3. Pay attention to the monthly car loan

After you have bought the car, there are a number of additional costs. So do not only look at the monthly costs of the loan, but also what you spend on the car. Think of fuel, car insurance and road tax. The total picture must fit into your budget.

4. Not borrow more money for car than necessary

If you want to take out a  loan for your car, do not borrow more than you need to buy the car. Borrowing money for your car costs money, as you now know. In addition, the residual value of a car is often not high, so your new car is not an investment that you easily earn back.

5. Choose car loan lender

If you are going to apply for a loan for your car, it is always smart to compare the different lenders. After all, there are many providers who each have a different interest and different conditions. As a result, the difference between the most expensive and cheapest car loan quickly rises to 700 euros per year! So do not be a thief of your own wallet and save on your car loan by comparing and choosing the loan with the lowest interest and best conditions.

6. Buy a car with a loan, take into account the depreciation

Once you own a car, it becomes worth less. In the first few years things are going fast with the so-called depreciation. If you have taken out a car loan, it is smart to make extra repayments where possible. For example, the loan keeps the trend with the depreciation. If you sell the car within the repayment term, it is easier to repay the rest of the car loan with the amount you get for the car. Moreover, you save money under the line, because you pay interest costs for less time!

7. Borrowing for a car? Insure your car all risk

If you have bought the car of your dreams, it is important to properly insure your new property. An accident is in a small corner and it is a shame if you drive damage and do not receive compensation for the wrong cover.

If you buy a car with financing, we recommend that you insure the car all risk. For example, if you drive the car through your own total loss, you want to receive compensation. Otherwise, you are tied to car financing while the car is on the scrapyard. Just like with a loan, comparing your car insurance is also smart. This makes it easy to find car insurance with the most appropriate coverage at the lowest premium.

Financing your car with a personal loan from a lender is therefore our advice. With the above tips you know what to take into account and find the car loan that suits you best. Enjoy your new car!

Pay attention! Are you going to finance a 2nd hand car and do you not have enough money to buy a replacement 2nd hand car in case of major damage or theft? Then it is smart to insure your car more extensively during the term car financing used car. This way you will not be left with a 2nd hand car financing while you can no longer use the car.

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