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The dream of owning a car requires a long time of saving. If you don’t want to do without your mobility for this time, you can use an installment loan to buy a car. There are several ways to get an installment loan for buying a car. Almost every automaker now works with a partner bank. For the car buyer, this means that they can get the loan straight away in the car dealership. Some manufacturers even advertise with interest-free loans when buying a new car. A comparison with the second option is definitely worthwhile here.

The way to the dream car

The way to the dream car

This option means getting yourself a loan on the credit market and then acting as a cash payer at the car dealer. With the choice of the second option, every car buyer can end up driving cheaper than with the loan mediated by the car dealer. There can be several reasons for this. On the one hand, the dealer has to hand over part of his commission to the bank for very low-interest loans for his customers.

This can limit the car buyer’s negotiating scope when it comes to the purchase price. If the car is a used car, it is even more interesting to take out an installment loan for the car loan from the house bank or an online bank.

Experience has shown that the conditions here are more favorable than with a loan that is brokered by the car dealer.

Balloon rate or constant high rate – the financial scope decides

Balloon rate or constant high rate - the financial scope decides

With an installment loan for buying a car, the buyer can basically choose between two different types of financing. On the one hand, a loan contract for constant installments can be concluded during the entire term of the loan. The vehicle is paid off at the end of the credit period. The monthly charge for the borrower is the same for each installment. Alternatively, the borrower can also take out a balloon payment at the end of the term. This form of financing is particularly popular when buying a car.

The advantage for the borrower here is the low monthly charge, since the monthly rate is far lower than in the first variant. This option is particularly attractive for low-interest loans. The borrower can save on the balloon rate throughout the loan term without being exposed to unnecessary costs. In addition, due to the low monthly load, he remains flexible with regard to his budget planning.

In the case of a higher interest rate, the first variant may be more recommendable. In this case, the repayment of the loan amount is higher each month and therefore less interest accrues over the entire term of the loan.
Ultimately, the individually offered terms and budget of the borrower decide which installment loan is best for the car.