The different types of financing for a car
When buying a new car, it is rare to be able to pay cash. In general, the purchase of a car presupposes that one contracts a credit. Given the large supply of financing on the market, it can be difficult to navigate. In this article we will decrypt for you these different means of financing.
Long term rental
The Long Term Rental is a lease of a property, usually a car, established between the user of the car and a financial company that owns the car.
When you buy a LDD, the contract sets the duration of the lease and the mileage, according to your needs. The rent depends on the value of the car as well as its number of kilometers. A contribution may be required but it is not mandatory.
Two periods are to be distinguished. During the rental period, the renter of the vehicle pays the agreed rent and the financial company remains the owner of the car. It is nevertheless the tenant who is responsible for the maintenance of the vehicle as well as its insurance. When the contract expires, the renter must return the car to the financial company. He can then conclude a new LDD to acquire a new vehicle.
Rent with Purchase Option
The Lease with Purchase Option or LOA, is a lease of a property passed between the lessee of the vehicle and a financial company that acquires the property of the property, here a car.
When you buy a LOA, you generally agree for a lease term of 2 to 5 years.
You will have to pay a first rent which corresponds either to the recovery of your old vehicle, or to a contribution. Then, you will pay a monthly rent to the financial company owning the car.
As a renter you are responsible for the maintenance of the car as well as its insurance. When the contract expires, you have the option to purchase the vehicle at the price agreed in the contract. You can also decide to return the vehicle.
Balloon credit is a device that combines the characteristics of credit and leasing. It is increasingly used by dealers to acquire a vehicle. The dealer gives you a new car against the payment of monthly payments over a given period (from 12 to 48 months). A personal contribution will also be most often requested before the provision.
When the rental period ends, you have several options. You can buy the vehicle for the sum agreed in the contract. This redemption price is called the balloon. You can also return the vehicle and why not take out a new loan.
You can resell the vehicle if you think you can get the same amount or more of the balloon to pay it back. Finally, in some cases you can request the extension of the lease for two years.
Financing by CAF
It is possible to finance the purchase of his car through two loans from CAF for people in precarious situations.
Pre-loan is an interest-free loan that allows you to borrow money to replace your vehicle. To obtain this loan must however meet certain conditions. You have to face real financial difficulties and get family benefits. You must also have at least one dependent child and not exceed a certain family quotient. For the purchase of a car you will also have to attach to your file some supporting documents.
The loan of honor also allows you to obtain a credit to buy a car, even in cases where you would be stuck at the Bank of France. In order to be entitled to it, one must benefit from the help of the social action. Your file must then be taken care of by a social worker.
A personal loan is a loan that is not assigned to a particular purchase. So when you apply for a loan you will not have to produce proof of the allocation of your credit. When you receive the amount of your loan, you can allocate it to the desired expense.
The personal credit agreement is drawn up in writing for a repayment period ranging from 3 months to 7 years. The loan is usually made at a fixed rate.
The use of personal credit, since it does not allow the allocation of your credit, does not allow you to be protected against the lack of sale while benefiting from a cancellation of your credit.
The car loan is a loan agreement exclusively for the purchase of a new or used motor vehicle.
Unlike car rental contracts, you become the owner of your car upon signing your loan agreement. You can therefore resell your vehicle before the refund of your credit. The credit also gives you some security during your purchase process. If the sale of your vehicle is canceled or defective, your credit agreement is also canceled.
Finally, you can repay your car loan for the duration agreed in your loan agreement, or make an early repayment.
Auto loan in an online bank
The principle of auto loan offered by an online bank is the same as for auto loans offered by physical banks. The only points of divergence concern the particular functioning of online banking.
The demand for auto credit online is faster. You do not have to move, administrative procedures are done directly on the internet. Because of the dematerialization of the services, it is not rare to be able to benefit from more interesting rates when you choose an on line credit.
Finally, you can more easily make comparisons between different offers of loans offered by banks online, through a comparator. This allows you to find the best rate for your car loan more easily and quickly.
When you want to borrow money for the purchase of your car, you do not have to take the loan application process yourself. You can hire a credit professional to act as an intermediary between you and the bank. This credit professional is the broker.
Brokerage can have some advantages. This allows you to save time in the first place because the broker knows the auto loan market. He will consult the various loan offers for the purchase of your new vehicle.
It also has a network of contacts in the insurance industry that will facilitate the search for the most advantageous rate. Brokerage then makes it possible to target the loan offer best adapted to your needs and your financial situation.