The purchase of a car for their own cash savings is not available to every citizen. A car loan will help to solve the problem, the design of which is not particularly difficult. Banks offer loan programs on various conditions that are suitable for specific situations. In order to get a loan, you need to choose the best option for the contract, collect a package of documents and submit an application to the bank.
Due to the existing competitive environment, financial institutions are forced to lower interest rates and attract customers with profitable programs with small overpayments and simple registration. Before making a decision, it is necessary to understand the terms of the loan and the contract, to study all the offers of the banking services market. The procedure is greatly simplified if you have a certain amount on hand to pay the down payment, and the higher it is, the lower the percentage of overpayment. A large number of lending programs allow you to purchase a car without having the necessary amount to buy.
Types of Lending Programs
To choose the best program, it is better to familiarize yourself with all types of car loans, the pros, cons and problems for today:
- A classic loan is the most profitable option, which is popular among the population and allows you to buy a car with minimal overpayment. The down payment amount is from 10% of the cost of the car, the rest is distributed over the entire loan term - from 1 to 5 years.
- Express loan. The pros and cons of a car loan are obvious. Pros: a minimum package of documents, quick execution, no need for an income statement; the disadvantage is a high interest rate.
- Loans without down payments. The requirements imposed by a credit institution on the solvency of the client are more stringent, there may be unprofitable lending conditions. The interest rate depends on the type of currency and loan terms.
- Loans without insurance. Many banking organizations issue car loans without a Casco policy, which is a mandatory item of other loan programs. The selection of vehicles offered under such a program is limited. The cost of insurance is high, so the opportunity to get rid of it is quite attractive, but at the same time a high interest rate appears and the amount of the down payment increases.
- Trade-In. The service of exchanging a used car for a new one. Part of the cost of the new car is paid off by the used car, the remaining amount is paid by the client.
- Buy-back - loan with repurchase. A program that involves paying the down payment, the last payment and part of the cost of the car before the deadline. Deferred payment can be paid by the client or car dealer. Loan terms can be increased, but in this case the amount of overpayment will increase.
- Interest-free loan, or factoring. The client pays half the cost of the car, the remaining amount is divided into parts without interest.
The most profitable loan program can be chosen only after a thorough study of all the proposed options. It is advisable to take into account, among other things, the possibilities and circumstances of the client himself, since preference may be given to different lending conditions, depending on the specific situation.
Car loan benefits
- The ability to purchase a car in the shortest possible time. Minimum savings allow you to buy a car, as they can be used as funds to pay down the down payment. The main requirement is a sufficient amount of income to repay the car loan.
- Preferential car loans. Government programs stimulate the acquisition of domestic cars by compensating for part of the loan interest. The program covers the brands of cars assembled on the territory of the Russian Federation. The maximum cost of a car should not exceed 750 thousand rubles.
- Long payout period. Car loan terms vary from 1 to 5 years. Choosing a longer term allows you to reduce monthly payments, which may be convenient for the client, but leads to an increase in the total loan amount.
Car loan disadvantages
- Harsh requirements for borrowers. To receive a car loan, a client must meet certain criteria: not have a bad credit history, be within the established age limits, work in one place for more than three months, and so on.
- The vehicle acts as collateral. Car loan involves the issuance of a certain amount of money to purchase a car, respectively, it becomes a guarantee of repayment of the debt. Accordingly, the borrower risks losing the car.
- Auto insurance. Along with car loans, many banking organizations require the purchase of a comprehensive insurance policy, which increases the total amount by 10%. You can refuse to purchase insurance, but this will increase the cost of the loan.
- An initial fee. The down payment amount is 10-30% of the value of the selected vehicle. Lack of down payment may adversely affect the interest rate.
- Long process of registration. The collection of necessary documents may take several weeks. Making an express loan can speed up this process, but the interest rate on it is much higher than on the usual one.
- Traffic jams. The availability of a car loan is both a plus and a minus, albeit indirect. The number of motorists is increasing faster than new roads are being built, which makes it difficult to move along city streets.
Making a loan at a car dealership
Car loans can be issued directly in the cabin. Lending conditions may vary, but there are certain nuances for different types of loans. Today, almost all car dealerships offer to issue a loan agreement when buying a car.
Pros and cons of car loans in the cabin
- Time saving.
- Convenience and ease of design.
- Quick receipt of credit funds.
- A wide selection of lending programs offered by banks cooperating with a dealership.
- Getting bonuses or discounts from a car dealership.
- The loan amount may include the cost of additional equipment installed on the car.
disadvantages
- Reducing the number of banks providing car loans.
- Often there is no possibility of choosing an insurance agency, which significantly increases the cost of the comprehensive insurance policy.
When choosing a loan product, you must consider all the pros and cons of a car loan at a car dealership. Dealers and bank employees may be silent about certain points that are written in small print in documents.
Special car loan programs
Some customers choose special offers from dealers and car dealerships - for example, Buy-back or Trade-in. Such systems are popular and have their own advantages and disadvantages.
Trade-in
The first installment of the loan is the cost of the old car. This program is one of the most attractive for those who want to change the vehicle. The dealer buys the car from the client immediately, provided that its technical condition meets the conditions of the program. The difference between the cost of the purchased car and the used car is paid by the borrower. Unlike the advantages of a consumer auto loan, the disadvantages of a Trade-in loan lie in the limited choice of cars and the low cost of a used car.
Buy back
The optimal loan program for those who like to change cars often. According to its conditions, the cost of the selected car is divided into three parts:
- Down payment equal to 10-50% of the amount of the machine.
- "Comfortable period." Monthly repayments, the amount of which is selected so that by the end of the repayment period 20-40% of the total loan amount remains.
- Residual payment. The pros and cons of a Buy-back car loan include an amount that is frozen until the end of monthly payments and is paid once. The client can either keep the car after repayment of the loan, or sell it and pay the balance of the loan from the proceeds from the sale of funds. The remaining amount can be used as a down payment for the purchase of a new car. Lending periods may be increased, but this will lead to an increase in overpayment.
Despite all the pros and cons, a car loan of this type is popular. The advantages of the Buy-back program are insignificant monthly payments and the possibility of selling the car until repayment of debts, the disadvantages are the need for service in an official service center, compulsory insurance and circular credit dependence. According to reviews, the pros and cons of car loans do not repel motorists from the decision to contact a bank or car dealership to purchase a car.