What criteria should I choose to compare a car loan?

Criteria of choice of automotice credit

Criteria of choice of automotice credit

This guide is here to present the different options available for financing your future car through a car loan. You will be able to compare the different financing possibilities, and make the choice most in line with your car purchase project.

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Whether it’s for a car, a motorcycle or a motorhome, every project is different. Do not panic, we are here to guide you in the comparison of car loan offers.

With or without personal contribution

With or without personal contribution

Having a personal contribution is always a guarantee of confidence for a car salesman. This is also the case when you apply for a car loan to supplement your contribution. The best shopping and credit solutions will only be presented if you have a personal contribution.

If you have no contribution, you can still use a credit to cover the cost of purchase. But you may be limited in the choice of the amount to borrow. Whether new or used, you will have to think about budgeting this purchase and especially the monthly repayments to be paid each month. In addition, you will need to demonstrate to the seller or credit agency that you are able to repay the loan, even with a contribution.

According to the desired amount

It is important to define your project of acquisition of a vehicle to know its financing needs. You can also turn to cars for which the government pays a purchase bonus (hybrid or electric engines). Also think about your repayment ability, the monthly payments of a credit are an additional charge in your budget.

The total loan amount for your vehicle may cover all or part of the purchase price of your vehicle. You will have to decide on the amount, taking into account your personal contribution, as well as your repayment capacity. If you are interested in a premium car, keep in mind that the credit amount can not exceed 75,000 €.

The duration and amount of car loans

The duration and amount of car loans

By operating an arbitrage between the duration and the amount of the monthly repayment, you can find the perfect balance. In France, the minimum duration of a car loan is 3 months and it can not exceed 75 000 €.

In fact, the shorter the repayment term, the less interest you pay, but the monthly payments will be high. If on the other hand you prefer to have lower monthly payments, the best is to extend the duration of your loan.

There are a multitude of organizations that offer car loans, but all apply different rates. It will also take into account any promotional operations: temporary rate reductions, fees offered, partnerships with car manufacturers.

In order to be able to report the rates according to your needs you can make simulations for your credit on our site.

Credit insurance

Credit insurance

The insurance of your car is mandatory, but it does not include the insurance of your car credit. Car credit insurance is optional but highly recommended, because it allows you to be more serene in the event of an unforeseen event.

It covers:

• Temporary interruption of work: when you are no longer able to work due to an accident or illness.
• Job loss: in case of dismissal, insurance can cover the monthly payments of your loan. The support can be partial or total. A waiting period may also apply depending on the insurance companies.
• One death: the insurance covers the family following the death of the holder of the credit agreement.
• Definitive and absolute disability: the illness, or an accident, can sometimes cause incapacity. This insurance allows to be serene in case of serious disability his family.

Long term rental or with purchase option

Long term rental or with purchase option

What is the LOA?

A long-term rental is a service offered by companies specializing in car leasing. The choice of a long duration reduces the monthly payments. But be careful, remember that you will not be able to own the vehicle.

Leasing with purchase option, or LOA, represents today an alternative solution for financing its vehicle. Mostly used by professionals, it allows them to amortize the monthly payments as a charge and deduct them from their accounting product. This type of rental a little special, also opens to individuals, who find in the LOA more flexibility.

For a period of 24 to 72 months, the renter of the car will have to pay each month a fixed rent. This amount is based on the model of the car, the estimated number of kilometers per year, and his personal contribution, if any.

The advantages of a LOA

The advantages of a LOA

A lease with option to buy can be interesting for an individual. Indeed, it has many advantages:

• Budgeting of automobile expenses
• Wide range of vehicles available at the LOA
• Vehicle maintenance contract (wearing parts, overhaul, oil change)

The disadvantages of a LOA

The disadvantages of a LOA

Do not forget to take into account that the contract will include rather binding clauses relating to the use of the vehicle:

• maximum number of kilometers per year
• perform vehicle maintenance and repairs
• pay all insurance costs
• pay the edition of the registration card.

The resale of the vehicle

The resale of the vehicle

Whether or not you are considering the resale of your new vehicle, it is worth thinking about before buying. If you are already thinking about resale, the smart thing is to plan your car credit accordingly taking care to check its resale price on a specialized site.. The best option is to provide a loan term covering the length of time you own the vehicle. This will avoid you incurring additional costs related to too long a car loan.

The credit report

The credit report

The carryover credit is a different way of approaching the financing of your vehicle. Indeed, you can defer repayment, the time to sell your old car. Very useful in case of heart stroke or a real deal, the advantage of this credit is to give you more flexibility. If you can not sell your old car, you will have to pay off your credit or separate yourself from your new car. So you will need to be careful, so we advise you to think carefully before you commit.

What are the pitfalls to avoid?

What are the pitfalls to avoid?

The revolving rate credit

The revolving rate credit

In the case of a car loan, this one can be proposed to you for a need in limited financing (in general less than 3000 €). The bank actually gives you a permanent “liquidity reserve” with which you can buy what you want. And if you need liquidity to finance your car, you can totally use this reserve. But the rate proposed for signature may change over time; and unfortunately, often on the rise.

This type of credit is therefore to flee like the plague, as it is dangerous. In fact, as has been well demonstrated, many revolving rate credits have seen their rates explode.

Hidden file fees

Hidden file fees

When signing your credit agreement, you may have to pay a handling fee. Sometimes some organizations do not alert you to these fees, and you may be surprised. The best thing to do is to read the offer of credit, and be aware of the costs that may be required. Think about it, once the legal withdrawal period has elapsed you will not be obliged to pay them.

If you decide to prepay the entire loan, pay attention to the conditions. Indeed some organizations do not hesitate to make you pay the high price to benefit.

Credit taken out with your car dealer

If you decide to go through a car dealership of a major brand, it is possible that he directly offers you a credit. However, you will not be able to subscribe to it without a large personal contribution. In addition, the trading margins are very small, and you may be forced to choose a specific car model, eligible for the offer. Beware of too tempting offers that consist in destocking models of unsold vehicles.

Rental traps with option to purchase

Rental traps with option to purchase

As part of a LOA, you must keep in mind that the car does not belong to you, and that it is a rental. At the end of your lease, you will be able to acquire the vehicle against the payment of the residual value.

The other black spot of the lease with option to purchase, is in the conditions of use of the car throughout the duration of the contract. At the signing, you commit to a maximum number of kilometers to go. If you drive more, you will have to pay a penalty at the end of the contract.

If you do not wish to acquire the vehicle at the end of the LOA contract, the owner company will recover the car. But if repairs are necessary, even minor (scratching on a wing, impact on the windshield), you will have to pay for the repairs.

To conclude

To conclude

From the moment you decide to buy a new vehicle, many options are available to you. Each with its advantages and constraints, you will first need to define your financing needs in a precise way. Once this step is decided, you can consult the different organizations and make a comparison between the different offers, and choose the most suitable.

For further:

For further:

In order to maximize the chances of getting a positive response for your credit application, we recommend reading our article on credit selection criteria online. If you want to go on holiday with your motorhome or a caravan, you can consult our file on how to obtain a caravan credit.

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