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Car Loans vs. Car Loans lease financing
Finance through car loans or leases – what’s better / cheaper? Car loan – which variant is offered and what are the advantages and disadvantages? If you opt for a loan agreement when purchasing a vehicle, you can either redeem it at a car-dependent house bank or at the car dealer’s house bank.
The latter usually lure with dumping loan conditions, which the independent banks can not offer from the entrepreneur’s point of view. Depending on the particular model, the manufacturer’s bank may intend to increase the sales of the vehicle in question using bait such as the often offered 0% financing. The car dealers usually collect a commission when selling new cars, so that they can make specific attention by targeted advice on these types, which generate the highest possible commission and at the same time give the buyer a favorable financial credit.
This could quickly cast doubt on the seller’s required objectivity. However, if the acquisition is made via an independent credit company, this neutrality is given much sooner. In addition, there is the possibility of special repayments in the case of external financing by an independent house bank. In this way, in the event of an unplanned / unforeseen increase in financial assets, the loan can be repaid on different terms (higher monthly installments, early repayment, etc.).
Borrowing takes place via a so-called consumer loan agreement.
This is partly legally prescribed, so that the borrower always has a fixed hedging relationship with regard to the settlement. It specifies exactly under which conditions the loan will come into force, in which cases the agreed loan agreement can be withdrawn and how to proceed in case of premature death of the borrower or insufficient liquidity.
Credit financing through a vehicle loan creates a triangle between the seller, the vehicle buyer and the counterparty. As long as the loan is not fully repaid, the purchaser may not sell or reproduce the car for no reason. Only with the last installment is he finally allowed to call the car his own. As a rule, the financing house bank therefore remains the owner of the vehicle until full repayment of the loan.
Generally, there are three types of loans: installment, balloon payment, three-way financing.
Ownership is the biggest difference between financing and leasing. Leasing is a form of permanent loan. That said, the car is still owned by the car dealer. When a lease expires, the car must be returned properly.
The general procedure for leasing is as follows: The selection of the suitable vehicle is made by the renter in the vehicle trade. This is then assumed by the leasing company with which the lessee concludes the temporary lease. At the end of the contract, the car will become the property of the landlord. Contrary to popular belief, leasing allows only traders to benefit from tax benefits.
The leasing company often gives the car to the dealer at the end of the contract. To give you an overview, here are some of these leasing models: If the actual value of the vehicle at the end of the contract is below the calculated amount, the lessee must buy the car.