A car loan with a final installment is mainly offered by the automobile banks for new car financing as well as for the purchase of annual cars and vehicles with a day registration. In the case of ordinary used cars, credit financing is possible if it is a young and well-preserved car with a corresponding sales price. As with any vehicle financing, even with a car loan with a final installment, the loan amount is secured by the security transfer of the financed vehicle. This is usually confirmed by the handing over of the registration certificate Part II to the credit bank until full repayment.
It is not absolutely necessary to leave the vehicle registration certificate Part II for the effectiveness of the transfer of ownership agreed upon in the case of a car loan with a final installment, since this is already entered in the loan agreement by the corresponding passage. However, it effectively prevents the car from being sold without the special consent of the bank before the end of the contract.
Advantages of car loan with final installment
In the case of a car loan with a closing rate, as in the case of any loan, the household bill checks whether the vehicle buyer can settle the monthly loan installments incurred during the term with his regular income. The loan amount inevitably decreases as well as the monthly rate, if the vehicle buyer decides on a car loan with a final installment.In this case, the actual amount of credit approved, but not the amount of the final installment to be paid after conclusion of the contract, will be included in the revenue and expenditure account.
The vehicle buyer pays these either from existing savings or from the sales proceeds of the financed car. He has, of course, the possibility to finance the final installment to apply for another loan. Ideal is the final installment loan for vehicle buyers who, at the time of their due date, receive money from a maturing life insurance policy or from the expiry of a time deposit.There is also the possibility of concluding a new savings contract to finance the final installment immediately after the purchase of the car.
The three-way financing as a special form of car loan with final installment
A special form of car loan with closing rate represents the three-way financing. In this loan agreement, the amount of the final installment at the same time as car value after the expiration of the loan financing fixed. The prerequisite for the recognition of the full amount as a residual value is that the mileage does not turn out to be significantly higher than agreed and that the motor vehicle is in a state in accordance with the contract.It is useful for the vehicle purchaser that the trader contractually agrees to buy back the car at the agreed residual value as part of the three-way financing.
In the classic car financing with a final rate, however, the vehicle dealer decides on the expiration date of the loan agreement, if and to what amount he takes back the car at the request of the customer. The other options, such as the payment of the final installment from existing financial resources or by means of another loan, are of course also possible with the three-way financing.
Does the chosen vehicle model affect the financing costs?
Vehicle dealers and automotive banks want to use special promotions primarily to stimulate the sale of models that are currently not in high demand or will be replaced in the foreseeable future by a modification. For this reason, most special offers for a car loan with closing rate at very low interest rates or even without interest calculation on selected vehicle models.
These are by no means qualitatively questionable, but for different reasons for new car buyers little popular vehicles.
Some vehicle prospective customers decide against the car loan with closing rate on preferential conditions, since they are afraid to sell the appropriate vehicle model later only with difficulty as used cars. However, this largely comprehensible fear is faced by several vehicles that were to sell as new cars only with special conditions, as used vehicles but are extremely popular.
There is nothing wrong with choosing good car loan deals with the final installment of one of the vehicles for which the special conditions apply.
5 tips on car loan with final installment
1. How should the final installment of a car loan be chosen?
The borrower should by no means forget about this loan, that after the term of the loan a final installment still has to be paid. Of course, this depends heavily on the other characteristics of the loan and, if possible, should be chosen so that it can easily be paid by the borrower without having to go into debt again.
As a rule, the final installment depends on the down payment and, of course, the monthly installments and interest. For this reason, the interest rates must be adjusted. The final installment itself must be settled at the end in one payment together with the last installment. But most banks also offer another loan for the final installment. Should the customer not be able to pay them directly, a loan can of course also be taken out at another bank.
2. What about the collateral for a car loan?
As a rule, the borrower must always provide collateral for a loan. These can either be completely eliminated or only very limited in car loans with a final installment, since the bank or car dealership usually keeps the vehicle registration until the vehicle has not been completely paid off.
Thus, the bank itself has no risk if the customer should not be solvent. The vehicle also belongs to the customer only when the final installment has actually been paid.
3. How should the installments and repayment term be chosen?
The term of the loan is directly related to the interest. The shorter the term chosen, the fewer fees the customer pays to the bank in the form of interest. However, the term of the loan should of course be chosen so that the rate can be paid off each month without any problems. It must not severely restrict the borrower in his life.
For this reason, a lower rate is recommended, although it may involve a higher total cost of ownership for the vehicle. However, the borrower himself is always on the safe side with this configuration.
4. The residual debt insurance
As with any other loan, so-called residual debt insurance should also be taken out for a car loan with a final installment. This intervenes when the borrower for various reasons, the rates can no longer pay.
This is thus hedged against a default and against high penalty fees and interest. The insurance itself is relatively cheap and can also be completed with a third party. This also increases the security of the car loan with a closing rate.
5. Which costs have to be calculated?
As a rule, banks and lending companies allow themselves to incur additional costs associated with paying out the loan. These costs should therefore be compared with different providers against each other to find the cheapest provider. However, the borrower should not forget that the monthly installments for the vehicle also include insurance, fuel, taxes and maintenance costs. These costs exceed the monthly rate for the vehicle in most cases and should always be taken into account as well.