Buying a financed car is usually the most common option among Spanish consumers. Having 10, 20, 30, or more thousand euros to buy a car in cash is not the most common and, for that reason, most of us end up financing the purchase of our cars.
How does financing a car work?
Financing a car works like almost any other financed purchase. In this case, the interested party (borrower) requests a loan of “x” amount from a third party (lender) to allocate the amount to the acquisition of a vehicle and remains in debt for the time determined by the contract signed between the borrower and lender with the obligation to comply with the deadlines and everything established in the said contract and at all times
Where can I find the best-financed car deals?
If you are interested in knowing the financing offers for new cars, we invite you to our offer search engine where you can request a personalized quote for any car that interests you. We, immediately afterward, will put you in contact with an official dealer who will be in charge of confirming, without obligation, the different options for acquiring the vehicle at your disposal.
If, on the other hand, you are more interested in second-hand used car financing offers and/or km0 in stock, we recommend you take a look at other search engines such as Clears.
What ways to finance a car exist?
There are basically four forms of financing:
Financing with the dealer:
To buy a financed car, the car brands themselves, through their official dealer network, offer different financing services. It is a form of acquisition to take into account if you are looking for advantages that only a dealer can offer you.
Advantages and disadvantages of financing the car at the dealer:
+ Discount. They usually offer a discount on the base price of the vehicle (an average of €1,500).
+ Comfort. All the paperwork goes faster and in the end, you don’t resort to third parties because you already know the dealer’s commercial and the local.
+ Extras. When financing the car you usually benefit from warranty extensions, discounts in the workshop, “personalized” service, etc.
– Lack of transparency. There are so many factors involved (base price, discount, monthly installments, down payment, the final installment, taxes, interest, extras…) that sometimes it is difficult to understand the contract and what one is getting into.
– Domain reservation. Generally, it is a clause in the contract that prevents you from selling the car until you finish paying for it, so if things go wrong, you would have a problem.
– May be more expensive. Despite the possible discount on the base price, the interests are usually high and, sometimes, the final price ends up being more expensive than expected.
The most common is to request a personal loan from the bank to invest it in the acquisition of the vehicle of your interest. More and more banks are joining this initiative and have standard loans specially designed for car purchases.
Advantages and disadvantages of financing the car at the bank:
+ Price. They usually offer a more competitive TIN and APR.
+ Transparency. Contracts are easier to understand and have fewer clauses.
+ Sale. You can sell your car to a third party whenever you want and settle the outstanding debt with the bank immediately.
– Basic cost. It is possible that the initial price applied to you will be higher.
– No extras. The bank does not sell cars, so it will not be able to offer you extras of any kind.
– 80% / 20%. They are becoming less strict, but many banks only allow you to finance 80% of the value of the car and the remaining 20% you have to pay as a “down payment”.
Renting is an option that is increasingly in demand. It is a rental contract with which you can drive a car for a certain time without having to pay for it. At the end of the contracted period, you have the option of returning the car or buying it paying its residual value.
Advantages and disadvantages of renting:
+ You can rest easy. By paying the fixed monthly installments, you can enjoy the car with some peace of mind because the comprehensive insurance, maintenance, assistance, repairs, and breakdowns are included and covered.
+ Deductions. Renting is a deductible tax expense for any company as long as its contracting is intended for the professional use of the leasing company.
+ You set the limit. You have at your disposal ratings that generally range from 24 to 60 months.
– Almost But no. The car is not yours unless you finish paying the installments and face the last payment to acquire the car as property.
– For little conservative people. Leasing is designed for people who want to change their car every 3-4 years.
– Do not go too far. Any rental contract has a limitation of annual kilometers to be covered. If you exceed the limit, you pay for each extra km.
By the way, on our search engine, you can find many renting offers that will surely catch your attention.
It is a rental contract similar to renting, but with leasing, the administration of the car is on your own. Of course, the monthly installments are usually lower and, as in the previous case, at the end of the contract, you can buy the car paying its residual value or return it.
Advantages and disadvantages of leasing:
+ Up to 100%. Indeed, you can finance all the necessary investments if you want.
+ Tax advantages . The value of the amortization installments can be taken as a tax expense, for which the total value of the machinery or equipment can be deducted as an expense, except for the payment of the residual value of the asset.
+ Flexibility and speed. If you need to build a fleet of cars quickly, it is a good option.
– Almost But no. The car is not yours unless you end up buying it at the end of the contract.
– You take care of it. Leasing, as we saw, covers everything or almost everything, and with leasing, the administration and expenses are “up to you”.
– No cancellations, thanks. If you cancel the contract early, the penalties are quite “interesting”.
Financing the car: is it better for the bank or the dealer?
It is a very frequent question among consumers who want to buy a financed car. Unfortunately, there is no manual and it depends a bit on your interests, we recommend you do your accounts and ask for information from both to see which option is best for you. Of course, broadly speaking, we recommend financing with the dealer if:
- You need a quick credit.
- You do not intend to cancel said credit in advance.
- Your financial situation is so stable that, in the event of an unexpected turn, you could face any outstanding debt.
- You do not intend to sell the car before the contract expires
For its part, we recommend financing with the bank if:
- You are interested in receiving more competitive TIN and APR conditions.
- You are not so confident in your financial situation and you want to reserve the possibility of selling the car at any time to face any debt in case things go wrong.
Tips for buying a financed car
The best advice is that you first choose the form of financing that suits you best (financing with a bank, financing with a dealer, renting, or leasing).
After this, it is very important that you focus on all the conditions resulting from the way you choose: the opening commission, the commissions for early cancellations, the interest to be paid, the additional services included, the domain reservation, the documents necessary, possible discount losses, permanence clauses…
We cannot know what type of financing best suits your needs, but we can tell you when one or the other is usually more convenient.
For people who want to not worry and change their car every 3-4 years, renting or leasing usually come out as winners. While, for those who prefer to buy a car and make it theirs from minute 0 without paying attention to the possible warranty and after-sales extras, financing with banks is usually the best card. For its part, dealer financing is usually reserved for buyers with certain financial stability who want to buy a car with extras that only the dealer can offer.
As you can see, buying a financed car is not convenient or inconvenient, but rather one more way available to the consumer to acquire a vehicle. Having this clear, it depends on your interests to assess whether financing is the best of your options to get the “vehicle of your dreams”.