For several years, my car has been getting more and more problems for some time. Therefore, despite the fact that for many years he reliably took me to work and the whole family for closer and further weekend and holiday trips, it was time to break up. I was able to sell the car, which – let’s be honest – was not easy. I started looking for a new one, but before the transaction takes place, I have to choose the best way to finance the purchase. I bought previous cars for cash. This time, however, I decided to take a car loan. I assumed that I would rather pay the loan installment every month than spend a few dozen thousand zlotys once (I plan to spend about PLN 70 thousand on buying a car).
Which loan should you choose?
I admit that so far I have not been very familiar with the subject of car loans. I just didn’t have such a need. Now, however, forced by the situation, I began to check and compare offers. First observation – there are few banks providing car loans. I am referring to banks offering loans for the purchase of vehicles, not cash loans / borrowings that can finance the purchase of a car. There are also busses, i.e. institutions associated with importers of specific brands (including Fiat, Toyota and Volkswagen). It also turned out that car loans can be repaid in several different ways – in a standard way, with a balloon installment or e.g. 50/50. How do they differ from each other? Who are they addressed to? I explain it below.
Standard car loan
The standard loan is repaid in principal and interest installments (usually in equal installments). The loan amount plus our own funds should be enough to finance the purchase of the car. Some banks, e.g. Smartin Bank, finance up to 150 percent. vehicle values. The amount of credit granted is transferred to the seller’s account (e.g. dealer or commission), collateral is established, we get a repayment plan and repay the liability for e.g. 5 or 6 years. Standard loan can be granted for up to 10 years. It can be used to finance new and used cars (in the latter case the rule that the car’s age and loan period may not exceed a certain value, e.g. 15 years). It is also possible (at Smartin Bank) to finance a car imported from abroad. Nothing more needs to be explained for this product. In its design, it does not differ much from cash loans or housing loans. The latter are also connected by security – one of the ways to secure a car loan may be a registered pledge, i.e. the equivalent of a mortgage established on movable property (an entry must be made in the registration certificate with the text “There is a registered pledge on the vehicle for XYZ bank entered under pledge register entries 1234 “).
The other two types of loans – with a 50/50 balloon installment – are a little more complicated. They differ from standard loans, among others. the fact that only new cars can be financed through them and that they are mainly (though not only) provided by busses.
Credit installment loan
It can be found primarily in the offers of banks related to car importers (but not only – it is also offered by, for example, Bankate). What makes it stand out? Design and to which clients it is addressed. When deciding on this type of loan, we pay at the beginning e.g. 20% the value of the car, we pay 50% in monthly installments (paid e.g. for 3 or 4 years) the value of the car, and finally we have a balloon installment of 30 percent. For a car that costs 70,000 it would amount to PLN 21,000. We now have three options: leave the car in the settlement to the dealer (it will be valued for us and its value will be our first payment for a new car), pay off the balloon installment once or spread it out in installments. The loan with balloon installment is therefore primarily for people who want to replace the car with a new one every few years.
50/50 loan (and more)
This type of loan is offered mainly by busses, although the 50/50 or 4×25 percent offer you can also find one at Smartin Bank (it can be used by people who want to finance the purchase of a new Opel, financing is available in showrooms of this brand). The rules for this type of loan is simple. In the case of a 50/50 loan, before collecting the car we pay half the value of the car, and after a year the remaining 50 percent. This second part of the commitment can, of course, be divided into installments. They are – attention! – interest-free. This does not mean, however, that this loan will be free for us. We must pay a commission for granting it (from 0 to 5 percent) and incur the cost of insurance. A 4×25 percent loan works similarly. We pay a quarter of the price of the car first, and subsequent installments (each is 25 percent of the price of the car) we pay every year. This loan is not interest-bearing either. You also have to pay a commission and buy insurance for it. You can also find a 3×33 percent loan on the market.
What to choose?
I drove my car for at least a few years. This will also be the case with new acquisitions. That is why I decided on a standard loan, which I will pay back for 6 years. If I can afford it, of course I will pay it back ahead of schedule. However, I don’t regret the time spent comparing offers. I met a new car loan market for me. And what credit would you like to finance the purchase of four wheels? Or maybe you have already bought a car, financing it with one of the loans described above? If so, be sure to let me know in the comment!