Despite the corona pandemic and lockdown, prices for used and new cars have risen. However, auto loan interest rates remain low. And for many borrowers, it pays to compare loans and get different quotes in order to get the best possible deal. But numerous car buyers finance their vehicle through the dealer’s financing partner. This is not always the best and, above all, not always the cheapest solution. Because most car dealers only work with a certain or very few credit institutions. In most cases, the car dealerships will arrange the loans through the vehicle manufacturer’s bank.
That is why car prices continue to rise
In particular, the prices for new cars have continued to rise in the past few months of the Corona crisis. And that, although the mobility was clearly restricted, especially during the lockdowns. With regard to used cars, prices actually fell last year. But now prices are picking up again significantly here too. The car is still one of the most expensive purchases for many people. For many car buyers, a loan is still the best way to finance a new vehicle.
A negative SCHUFA entry can give some people a headache when it comes to car financing. But who certain requirements for car financing without a good SCHUFA fulfilled, does not have to worry here either.
In 2020, millions of drivers bought a new vehicle. Although fewer people bought a car than in the previous year, on average they spent significantly more money on it. For a new car, buyers paid an average of 8.2 percent more than in the previous year. The price of used cars even rose by around 20 percent. In fact, it has been observed for a number of years that car prices are rising faster than consumer incomes.
Improved standards are causing prices to rise
The rapidly rising car prices are not least due to the rapidly advancing comfort and the continuously improved equipment of the cars. Air conditioning is now standard equipment. Not too many years ago air conditioning was only built into luxury models. The security standards are also increasingly being adapted. The enormous price jumps in new cars mean that fewer and fewer drivers can or want to afford a new car. This in turn leads to increased demand for used cars. And so sellers can set higher prices here too.
Interest rates remain low
The increased prices for new and used cars can leave car buyers disappointed. Fortunately, however, the high acquisition costs continue to meet the lowest possible interest rates. In fact, car loans are a few percentage points cheaper than before the Corona crisis. They currently only cost consumers about half as they did eight years ago. But be careful: not every bank offers every customer the best possible conditions. How high the interest rates are for the individual depends on various factors. Therefore, a loan comparison is strongly advised.
Anyone who compares has the best chance of a cheap loan
Anyone who gives the car dealer to understand that he wants to finance his vehicle with a loan will also receive a financing offer for the appropriate car model on the table. This is tempting for many customers. It saves you time and effort to go from bank to bank and obtain and compare offers. And after all, time is money too – isn’t it? In this case, the supposed time savings can be costly.
The interest rates for car loans differ on average by up to around 80 percent.
If you look at these enormous interest rate differentials, you will quickly understand that a loan comparison is worthwhile. And the more providers are compared with each other, the higher the probability of getting the best possible loan. Car dealers often only make a single loan offer; if things go well, the buyer has the choice between two to three different offers. Because most car dealers only work with a very manageable number of credit institutions – namely with the banks of the car manufacturers whose models they sell. Car buyers should therefore not only trust the dealer’s financing offer.
Car dealers also make money on the loans
Another reason is not to rely solely on the car dealer for a cheap loan offer. Because in many cases the dealers receive a commission from the credit institute when they successfully refer new customers. The amount of the commission does not only depend on the loan amount. The level of interest also plays a role. The banks do not give the car seller a special interest rate, but give him a certain amount of leeway. So there is a great temptation to charge customers the highest possible interest rates.
And on the subject of time savings: The days in which you had to contact individual credit institutions directly in order to be able to compare loan terms are over. It is now possible to compare loans conveniently online from home using comparison portals.
Without SCHUFA entry for car financing
Comparing is important for a cheap car loan – but this should be done without SCHUFA entries take place. Because who one Makes loan application, automatically receives a SCHUFA entry. This can be circumvented through non-binding credit inquiries. A non-binding inquiry is not associated with a SCHUFA entry and therefore has no negative effects on the credit rating.
And what if the credit rating is already bad when the loan request is made? A classic bank loan from reputable credit institutions is difficult in such a case. The alternatives are usually associated with higher interest rates and, above all, high risk. Car buyers must be careful that the purchase of financing the vehicle does not become a debt trap.
First of all, it must be ensured that the credit rating improves and a loan from a reputable provider is possible. For example, it may be worthwhile to check whether the bank can be promised certain collateral such as credit balances or a guarantee.
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