Car loans are traditionally associated with a down payment or a final installment, and loan models with both special payments are also widespread. A closing rate means that in addition to the regular credit installments at the end of the contract term, the vehicle buyer pays a significantly higher last installment compared to these.
For this reason, the loan installments during the term are lower than for a car loan without a final installment. Ideally, vehicle buyers pay the final installment from savings made during the term, but they can also finance them if necessary. The vehicle buyer only has a firm commitment from the bank paying the car loan to finance the final installment with three-way financing.
The traditional car loan with a final installment also does not provide for the return of the vehicle at the end of the contract. The car loan with a final installment is primarily used to finance a new car or an annual or demonstration car; for older used vehicles, the purchase price is usually so low that it is possible to repay it within a short credit period even without a final loan payment.
What is the advantage of the closing rate?
A car loan is paid off faster compared to a final installment than without a final installment. While either a high start-up rate, a high monthly rate or a longer loan term must be chosen if the loan closing rate is waived, the vehicle loan with a closing rate can be concluded over a relatively short term with moderate monthly rates. A car loan with a final installment is ideal if life insurance or a savings contract is due anyway at the time of the final payment.
In other cases, the vehicle buyer saves the amount intended for the final installment in a savings account with good interest, for which many banks offer savings plans. Before the contract is concluded, the vehicle buyer and borrower makes a car loan comparison with the final installment at different levels before deciding on an offer. In addition to the effective annual interest rate, the amount of the final installment is decisive for the choice of car lender.
The vehicle buyer must be able to save these without difficulty by the due date. A realistic assessment of the savings potential takes into account the costs associated with owning a car, something that first-time buyers of their own vehicle sometimes forget.
Where to take out the car loan with the final installment
A car loan comparison with the final rate between the loan brokered by a dealer to a car bank and the loan offer from an independent commercial bank shows that the car loan is the cheaper offer thanks to extremely low-interest rates. This observation is apparently correct, especially since the granting of a cheap loan also serves to promote the sales of the respective car brand.
However, the car loan comparison with the final rate between the car bank and the free commercial bank does not take into account the savings potential through a discount on the vehicle price. The dealer is most likely to grant such a loan and to a significant extent if his customer does not finance the car through him.
This behavior of the trader is easy to understand because he refinances part of the cheap loan through cost-sharing. Banks are happy to finance the car purchase at a final rate on favorable terms since in the case of a car loan the financed property itself is considered to be credit security.