Used car financing – with little equity but still buying a car. Typically, financing can buy a new car if the buyer does not have enough equity at the time of purchase. Buy a loan for a car Take out a loan – even if you have a poor credit rating or an unfavorable credit rating. But then the car is paid off in full. Since today hardly anyone wants to save for years before buying a car, financing with a loan is often preferred. Vehicle purchase: Take advantage of a dealer-independent loan and trade with the automobile provider.
Used car financing – still buy a car with little capital
As a rule, the financing option can be used to purchase a new car if the buyer did not have enough capital at the time of the purchase. However, it is now also possible to apply for a loan to purchase a used car. Especially if your favorite car was a young vehicle, it is advisable to pay with a corresponding loan, since many cars are characterized by a small loss in value.
This guide covers the different types of financing that can be available to you when buying a used car. There are various financing options for the purchase of a used car. The following variants are particularly popular: Financing through a house bank or a specialist dealer is an installment loan with various conditions and fluctuations.
There are also dedicated used car loans where the car remains in the possession of the house bank as security until you have completely repaid the loan. For financing through trade, an advance payment is often required, which allows greater flexibility in terms of terms and monthly installments. In the course of installment financing, you can also register for so-called balloon financing.
This is a variant of the usual installment loan, in which you initially pay constant, low monthly installments and end up with a higher final installment. Applying for another loan for the final installment is not uncommon. The special case of balloon financing is three-way financing. With this option you can choose at the end of the period whether you want to keep your used or back?
Here you can also rent your used vehicle for a certain period of time and then return it. The peculiarity of three-way financing is that in the leasing business you only use the car that is always in the dealer’s possession. As a rule, a house bank offers you the option of financing a used vehicle with an installment loan without prepayment.
This is a loan where the total amount is paid into your bank account immediately after the relevant conditions have been met. You then have to repay the monthly installments including interest to the house bank at regular intervals. The sum of the monthly installment or the duration of your loan, as well as the associated interest when the contract is concluded, is determined in individual cases.
Some cases charge higher loan security costs
You have the choice here to either shorten the loan term accordingly and pay larger monthly installments, or to opt for a longer-term and thus increased credit burden. Before concluding the contract, it is advisable to link various financial offers with one another to find a suitable alternative.
There are considerable differences in the amount of the monthly installments and the annual interest rate for loans. However, this information may change depending on the professional situation and creditworthiness, as the service provider may in some cases charge higher loan security costs. If the result is positive, you will receive an immediate approval from the house bank. However, you can still variably set the monthly rate and the duration within the given range.
Now all you have to do is sign the credit application and send it to the service provider together with the necessary documents. When financing through the specialist dealer, you choose a loan that is granted through a cooperation bank of the provider. The specialist dealer receives a commission for this. You can pay for your existing car, which reduces the loan amount accordingly.
It is crucial for the success of an installment loan that you are tied to a certain house bank when granting a loan and therefore usually find less favorable conditions in practice. With an installment loan, on the other hand, you can choose any house bank and benefit from more transparency. In most cases, a 0% interest-free and free financing option is now offered.
Some providers offer you balloon financing or three-way financing. Due to a lack of interest, a certain partial amount can be saved until the end of the period, which can either be invested in the higher final rate or, if you return the car, used for the prepayment for a new vehicle. However, many traders tend to take out additional insurance, as it appears as a debtor to your house bank in the event of financing.
For example, a borrower is often required to take out additional insurance such as residual debt or credit default insurance. Of course, such insurers raise the price of the overall loan accordingly. It should be taken into account that good credit is an essential prerequisite for debt financing of a used car through the dealer. If you definitely have a used car that is as good as new but doesn’t want to take advantage of the expensive funding option, you can sign up to lease a car.
The monthly installments for the leasing business also tend to be lower than for financing. Here you can discuss a specified number of kilometers with the specialist dealer or conclude a residual value contract in which the vehicle value is determined at the end of the leasing period. At the end of the contract period, you can choose whether to return the used vehicle, extend the rental contract or buy the car.
If you have decided on the third variant, the specified difference value from the actual value of the vehicle will be retained. In the leasing business, the dealer remains in possession of the vehicle and can therefore set all conditions. The good financing alternative is the leasing business for the self-employed, since they can deduct VAT on the monthly leasing payments.
With balloon financing, as a borrower you initially pay significantly lower monthly installments, but at the end of the day you have to pay a higher final payment. This closing rate corresponds to the total value of your used car at the end of its validity. Some specialist dealers offer either an extended balloon financing or a three-way financing, in which you have even more options than the conventional version.
For example, you can return your used vehicle to the seller at the end of the loan period, comparable to a leasing transaction, and pay the last installment. Here, too, you agree with the specialist dealer the maximum mileage for the entire duration of the funding. In contrast to a leasing contract, you become the owner of the vehicle in the case of balloon financing and are responsible for keeping your vehicle in a reasonable condition.
It is not unusual for the fee to fail due to the significant exceeding of the number of kilometers and for the operator to provide a highly compensated service. You can also pay the last installment by paying immediately with a one-off payment or by starting a new round of financing. However, this option often causes a higher loan expenditure, since the final interest rate is usually excessive in practice.
Of course, you can also sell your used vehicle during the term and make the final payment. Sufficient creditworthiness is required in most cases for the financing of a used car. With such an audit, the house bank will be informed within a few moments of your personal Sufascore, which is based on all data stored about you.
Actual borrowing costs of your loan
If you do not do this, your balance may increase. Financing of used cars is also possible despite the negative situation in Switzerland. It is not uncommon for security reasons to transfer the registration certificate for your vehicle so that the used vehicle is in the possession of the relevant provider. The guarantor must have a good credit rating, as he also acts as a borrower to the house bank.
Because your new car is a used one, it is advisable to include the costs of repairs over time in the calculation. Please also note that used car financing is only possible if the vehicle was first registered less than 10 years ago.
Just before you make a financing decision for your used car, it makes sense to check the various conditions. When comparing loans, pay particular attention to the actual annual interest rate, as only this information can be relevant to you. This interest rate gives you precise information about the actual borrowing costs of your loan.
Also consider which form of financing is best for you. Although some merchants offer an interest-free 0% financing option, you have to give up on the usual cash payer discount. However, if you want to use your used vehicle to a limited extent, the leasing model may be sufficient for you.
Balloon financing is particularly worthwhile if you can expect a high special payment towards the end of the period. Otherwise, this type of financing is usually considerably more expensive in practice, especially if additional loans are granted for the last installment. Conclusion: Used car financing – check conditions and ask between dealer and bank offer.
If you want to buy a used one, you can choose from various options depending on your individual life situation. In addition to direct dealer financing, there is also the option of traditional partial financing through a house bank. When it comes to dealer financing, you can still choose between classic financing and balloon financing. The decisive advantage of balloon financing is that it has to pay clearly lower monthly installments at the beginning and a higher completion rate only remains at the end.
If this variant is supplemented by three-way financing, you can also choose whether to return your car to the dealer or not. Because with an installment loan, you can transfer the entire loan amount directly to your bank account and thus buy the used one in cash. Therefore, it is always advisable to check the relevant credit conditions with each other in order to determine the right model for you.
If you cannot choose one of these options, there is also a hire purchase option. With us you usually pay lower monthly installments, but the vehicle remains in the possession of the service provider.