How do you finance your new car?

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Choosing, configuring and even ordering a car has become very simple thanks to the internet. The difficult part remains the financing, which in 2020 can be done in various ways. Lets take a deep look about how to finance your new car. 

Did you know that the car importers generate an average of one third of their annual turnover during the Motor Show ? Then you immediately understand why it rains salon discounts between December and February, which have to convince potential buyers to sign an order form with their concessionaire exactly during that period. 

And why not. A new car remains a serious drain on the family budget, which means that every euro saved is a bonus. High time to list the most common forms of car financing.

Financing with savings

How many cars will still be paid for with own resources in 2020 cannot be determined apart from the percentage point. However, assume that it is still the most popular payment method , which is usually carried out by bank transfer . 

Cash payments are limited by law to 3000 euros and therefore only current with cheap second-hand cars. Moreover, with a bank transfer you immediately have a proof of payment in your hands, while you can also have the transfer confirmed by the recipient to build in double security. 

This way, no discussion can arise about the payment, which must be made in advance with most car purchases in order to obtain the keys.

The main reason for financing a car with your own resources is because savings are currently not yielding anything . Moreover, the purchased good is immediately and completely your property . 

The disadvantage of a payment with your own funds is that your savings are lost in one fell swoop and can therefore no longer be used for other purposes . That makes this way of buying and paying especially interesting for people who can use additional reserves in need.

Financing through a car loan

Borrowing money to finance a car has been on the rise for several years. About a third of Belgians already do it today, and the number of car loans is increasing by almost 8% every year. You can borrow both through the bank and from the manufacturer himself . 

Let’s start with the bank, which immediately scores an advantage over other institutions. You can opt at your banker to use part of your savings and borrow part, which makes the monthly payments milder . 

The disadvantage, on the other hand, is that banks usually charge interest on the amount borrowed, while the car brands in the salon months already dare to screen with a zero interest rate .

So to be able to compare apples with apples, you have to go through the fine print. After all, one loan is not the other, which does not make a comparative study easy. With the manufacturers it is usually the case that you have to borrow the entire amount for the purchase, which immediately implies larger repayments . 

Also know that an interesting loan from a brand usually means less discount or a lower purchase price for your old car, so only start when you are satisfied with the price of the car itself. Otherwise you are guaranteed to miss out on a lot of discount.

Alternative car loans

Dig a little deeper into the offerings of the manufacturers and you will come across other forms of car loans, especially the bullet and balloon loan. With a bullet credit (also called interest-only credit or term credit) you only have to pay the interest during the term. 

Only after such a loan has expired does the part of the capital have to be reimbursed, which of course then turns out considerably. With a balloon loan (aka the loan with residual value), the installment is divided into smaller monthly installments in combination with one large, pre-agreed sum on the final maturity date of the loan. 

The remaining payment is also called the ‘balloon’. In both cases, the devil is in the tail, while the monthly repayments look all the more attractive.

Financing through private lease

A relatively new financing model that is steadily gaining in importance is the private lease: a formula that has come over from the world of professionals and stands for an all-in rental formula . 

The word ‘rent’ is important here, since the lease car always remains the legal property of the lessor . It is even prohibited by law to sell such a car to the tenant after the contract has expired. So what do you get with a private lease? 

A carefree car experience, where everything is arranged from A to Z. The rent, maintenance, taxes and assistance are settled in a monthly lease amount, which usually runs for four years, but is sometimes also offered for a shorter period.

At the end of the lease term, the car is returned to the lessor, who checks it according to Renta standards. Scratches longer than a credit card or dents larger than a two-euro piece will be charged as damage , as will stains on the bodywork or seats that cannot be cleaned with a simple cleaning. 

You really have to treat such a lease car with due diligence and do not change anything about it. In addition, the offer with private lease is usually limited , so you can only choose from a few models with fixed equipment. After the agreed term, the lease ends or you switch to a new contract for a different car.

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