There are many ways to finance a new car. Most dealers offer corresponding financing options. A loan for the new car can also be obtained from independent banks. The options available to car buyers and the advantages and disadvantages of these are explained below.
A popular loan for the new car is balloon financing. As with a conventional loan, this loan is repaid in monthly installments. The only difference is that the loan term does not cover the entire loan amount, so that at the last installment, the remaining loan amount must be paid in one amount. This can be several thousand USD, depending on the purchase price of the car.
This funding has the advantage that the monthly installments are low. That is why people with a low income like to choose this option so that the monthly costs are kept low. To choose this route, you should be sure that the remaining amount can actually be paid when it is due. Otherwise, there is also the possibility to finance this through a loan, which causes the purchase price of the car to skyrocket. For a new loan, interest must be paid again, which must be added to the purchase price.
Payment in installments by a car dealer
The car dealers also work with banks. An installment payment agreement can be made immediately after purchase. It is a car loan with constant monthly installments without having to pay a final installment in the end. There is nothing to be said against such a loan, because the interest rates of the merchant banks are roughly the same as those of the independent banks. The disadvantage of this financing is that the car buyer automatically foregoes the discount that is still available when paying in cash. Therefore, a loan for the new car from an independent branch or online bank is more recommendable.
Branch or online banks
A new car can also be financed at any independent bank, regardless of whether it is a branch bank or an online financial institution. This has the great advantage that the car can be paid for in cash at the dealer. In this case, there is a discount that reduces the actual purchase price even further. The terms of a loan for the new car are flexible at independent banks and the purpose remains free. This loan is the cheapest alternative to all other forms of financing.