Both commercial banks and vehicle manufacturers’ car banks grant auto loans at low interest rates. The reason for the low interest rates is not just the competitive situation, but also the above-average credit security.
This arises from the use of the financed car as loan security. For this purpose, the usual deposit of the registration certificate part II with the bank giving the car loan is not absolutely necessary, since the corresponding agreement in the loan agreement is legally effective in itself.
Car lending by the vehicle bank
Most vehicle manufacturers have their own car bank, which, like the dealer, is very interested in selling the models on offer. Rejecting vehicle financing almost always leads the potential car buyer to contact a dealer of a competitive brand. For this reason, the vehicle dealer is interested in being able to arrange the desired car loan for every conceivable car buyer. Dealer loans are particularly cheap for models with weak sales figures, where the interest rate sometimes amounts to zero percent.
With these vehicles, dealers and manufacturers are particularly interested in providing sales promotion in order to broker a car loan for everyone. However, buyers of vehicles sold with special loan conditions must be aware that after a few years they can only sell their vehicles as used vehicles with above-average losses. An interest-free car loan is therefore suitable for every vehicle buyer who wants to drive his new vehicle to the end of its life or who can resell it within his family.
The car loan through a commercial bank
If you take out a car loan from a vehicle dealer, you can only negotiate a small discount on the vehicle price with it, as the dealership bears part of the loan costs. In many cases the car loan taken out through a commercial bank is cheaper than the loan brokered through the car dealer. Although the independent bank charges a higher interest rate than the dealer, the prospective buyer in the dealership is considered a cash payer and can, if he has good negotiating skills, negotiate a larger discount.
With a car loan, it is possible for every car buyer to choose between different variants. In addition to classic financing with or without a down payment, commercial banks as well as car banks offer modern three-way financing, which combines the advantages of a traditional vehicle loan with the flexibility of car leasing.
The borrower makes a down payment and monthly installments and at the same time agrees a residual value to be calculated based on the planned annual mileage. At the end of the car loan term, which in most cases is three to four years, the vehicle buyer can decide whether to return the car or to finally purchase it at the previously agreed residual value.