Buying a car with credit or leasing?
If you have the money in cash or in your bank account or savings book, you should use it and not use a car loan or car leasing. If you don’t have the money to buy a car or don’t have all of it on the high edge, you are spoiled for whale and often have to grapple with the jungle of leasing offers and car loans. Warning – even if you don’t want to spend too much time on the subject of fundraising, it is really advisable to take at least some time for the information below regarding leasing & car loan.
Unfortunately, it’s not easy to make a blanket statement about whether a car loan or leasing is cheaper. The mere comparison of the monthly loan or leasing rate can only be used as an indicator to a limited extent. Both credit providers, such as direct banks and leasing companies, are obliged by consumer credit regulation to report the total burden and the so-called effective interest. These are the two key figures that can actually be used to compare car loan offers with leasing offers.
The basic difference between a car loan and a car lease is that you usually do not acquire ownership of the car when leasing . With a car loan, on the other hand, you actually own the vehicle.
Another advantage is the bargaining power over the car dealer. As a buyer who takes out a car loan from a direct bank and can then pay the car directly at the car dealer at a higher price, you have a far better bargaining position and can usually get a better discount because the dealer receives his money immediately after the contract is signed.
Conclusion – credit or leasing
If you want to change the car every three years anyway and do n’t want to keep it , leasing can certainly be a sensible option. However, if you would like to keep the car for longer, a car loan is to be preferred. Another advantage of a car loan is that you can negotiate the purchase price of the car directly with the dealer, which is often not the case with leasing.
In addition, absolute caution is advised when it comes to direct financing offers from car dealerships. Sure, handling is extremely convenient here. Nevertheless, you should always compare a financing offer from a car dealership, whether credit or leasing, with other car loans or financing options. Often, a potential buyer in the dealership is also told that there is only a certain discount on the car if the loan or leasing contract is actually processed through the dealership. In addition, the alleged “super special offers” are also limited in time, which the dealer only wants to influence in your purchase decision.
Warning: possible stumbling blocks in car leasing
The residual value is a very sensitive issue in car financing and at the same time the greatest uncertainty factor. In the calculation of the leasing rate, which is why it always appears very cheap in the first step, it is assumed that the vehicle can be sold at a certain value, namely the residual value, at the end of the term. The higher the residual value is assumed, the lower the leasing installments that you have to shell out. When calculating the residual values, however, the leasing companies do not let themselves be looked at on the cards.
A test by the Chamber of Labor showed that depending on the leasing company or bank, the residual value was assumed to be between $ 4,000 and $ 8,800 for an identical vehicle. It is logical that the bank that offers a residual value of $ 8,800 can offer cheaper leasing rates. But the bad awakening usually follows at the end of the term.
As a lessee, you are generally liable for the difference between the residual value (which the leasing company accepts) and the actual market value at which the vehicle can be sold at the end of the term. As a lessee, you may have a juicy additional payment at the end of the term. Attention: purchase right at the end of the lease term.
Make sure that you are granted a purchase right in the lease contract at the end of the term. Often this is not granted by leasing companies, mostly for tax reasons. If you really only want to use the vehicle, leasing can also be an option.
The third, often underestimated sticking point in leasing contracts is the prescribed mileage, which you are allowed to drive at maximum during the term. It doesn’t take much, for example a job change to a job that is suddenly 30 km away, and the limited mileage that is defined in the leasing contract will no longer be met. Even then, you have to pay a surcharge for the kilometers traveled at the end of the term.
These three stumbling blocks do not exist for car financing through credit. With an auto credit, you are usually the owner of the car, without an assumed residual value, and thus without the associated risk. In addition, you have no KM limitation.
Another advantage of car loans is the free choice of the scope of insurance. Compulsory comprehensive insurance is almost always mandatory for leasing contracts.
Car loan from the house bank
Of course, branch banks usually even offer several different vehicle financing options. However, financing via your own bank is usually associated with at least two dates and a longer internal lending process. In addition, Austrian banks are of course looking for new sources of income in order to compensate for the poor interest rates and at the same time comply with the tougher EU requirements. Decide for yourself based on the criteria presented above whether you would like to take out a leasing contract or a loan or a loan to finance the car purchase, and then do not deviate from this point of view – no matter what “exciting product” the bank advisor only have “a few days” and “exclusively for XXX-Bank customers” at hand.
Financing through car dealerships
Car dealerships have discovered not only the insurance business but also the financing business due to the increasing competition and the low margins in recent years. Therefore, the car dealerships often work in cooperation with your house bank, or they also offer financing offers from the respective car manufacturers.
Depending on the sales and production volume, it can actually happen that car manufacturers make really attractive leasing or financing offers available for a short time, but this is more the exception than the rule. However, the temptingly low leasing rates or exciting sounding third-party financing or “zero percent financing” are often more expensive in the end, since financing and special promotions are usually only possible in combination with the purchase at list prices. In most cases you will already lose approx. 15% room for negotiation. Then there is the big question of whether financing from the manufacturer is actually cheaper.
What car can I afford?
Our car loan calculator is designed so that you can switch between your desired amount and the monthly installment in the second field. So you can either specify that you want to take out a car loan of over $ 25,000, for example – that is, define a fixed loan amount. The second option “monthly installment” gives you the possibility to define a maximum credit installment that you can afford. Depending on the loan term and interest, you will then receive the maximum loan amount per bank.
Buying a car on credit often tempts you to choose a more expensive model or order the better equipment due to the low monthly loan installments. However, when choosing the model and equipment, pay attention to higher running costs with more horsepower . In addition, expensive cars are often more expensive to maintain and repair.
A higher insurance premium, a higher engine-related tax, or the more expensive tank filling are often additional costs that are often neglected when buying a car on credit. So think carefully about what equipment and, above all, what motorization you actually need, because not only the interest and loan repayment, but also the ongoing monthly costs should be taken into account when financing the vehicle.
Compare car loans online quickly and easily
In general, if you want a cheap car loan, you have to get a lot of offers and compare them accordingly – using the right key figures. To make it easier for you to compare the different loan offers, we have made our car loan calculator available online. Take your time and really get an online offer from the different direct banks in our comparison calculator – after all, you don’t buy a new car every day, do you? The credit request via our car loan comparison takes maybe 2-3 minutes per direct bank.