Companies That Finance
Companies That Finance Car Purchases
When choosing a company to finance your car, there are alternatives. Although it varies by country, here are the most common options:
Car Manufacturer-Associated Financial Companies: Automotive companies either own or work closely with financial companies that provide loans to those buying a car. It is likely easier to obtain this credit compared to getting it through a bank, but the loan interest rates are usually higher.
Banks: Bank loans typically offer lower interest rates compared to dealerships, but the process can be longer.
Other Financial Entities: There are financial entities not affiliated with the brand (and not banks) that offer loans. They tend to be slightly more expensive, and might not be the best option, but it's good to consult various sources to have more options.
Aspects to Consider When Obtaining a Car Loan
Besides the interest rate, you must compare other costs. Many loan providers may offer a seemingly cheap car loan by only indicating the loan's "initial" interest rate or indicative interest rate. However, this doesn't say much about the loan's true cost.
In addition to the interest, many loans also include various other costs, such as fixed monthly payments, account management fees, or similar costs. These quickly increase the actual price of the loan.
Therefore, it is always worthwhile to compare the actual annual interest rate that considers all loan costs, as it tells you the true price of the loan.
If a loan provider advertises a car loan with an interest rate that is too low, it is usually not the true cost of the loan.
Under no circumstances should you accept a loan offer before finding out the loan's actual annual interest rate. This way, you avoid unpleasant surprises when the first repayment is due.
Be prepared to make a down payment. If you have concentrated your finances in a particular bank, you can generally get a loan for the car's total price. However, full financing is not always obtained. For this reason, it's good to be ready to pay part of the car's purchase price with your own funds.
With the down payment portion financed through savings, the loan amount will be smaller, and you can pay off the loan faster.
Mortgage loans are long-term credits used to finance the purchase of a property, with the property itself as collateral. They have varying interest rates and repayment terms depending on the lending entity.
Requirements for Obtaining a Loan
Requirements for Obtaining a Car Loan
The requirements for purchasing and financing a car may vary depending on the financial institution where you apply for the loan, so they will be the ones to inform you. However, in general terms, the minimum conditions will be as follows:
Be of legal age.
Have valid identification documents.
Have a stable source of income
Not be on any debtor lists
Your current level of indebtedness with other entities (banks, financial institutions, etc.) should be reasonable
Loan Types
Types of Car Loans
On many occasions, the terms "loan" and "credit" are used interchangeably. Both allow you to obtain financing, but they have subtle differences that affect their basic characteristics.
Bank Financing: Banks offer personal loans or specific loans to finance your car. They will request personal documentation to study your case and verify your repayment capacity.
Dealership/Automotive Financing: This is the easiest option, as the dealership itself takes care of all the paperwork. They will offer you a loan, which can be for 100% of the car's value, and you can repay it in long installments.
Leasing: Through leasing, although you take the car to your home, technically, you are renting the car and it is not yours. In the leasing contract, you rent the car for a number of determined years and pay a monthly fee. At the end of the contract, it is most common to return the car, although you can also extend the contract (usually at a lower price). Leasing is convenient and has the advantage of including a series of services such as breakdown coverage, inspections, insurance, taxes, among others, which you would have to pay additionally if you owned the vehicle.
Leasing: Leasing is a hybrid between buying and renting. It allows you to rent the car and includes a purchase option (not mandatory) once the rental period is over. If you decide to purchase the car, you will have to pay an amount equal to the second-hand value. Additionally, you can return the car or sign a new leasing contract for another vehicle, such as a higher-end car or a newer model.
Last Update
4.11.24
HOME > FAQ
WHAT ARE CAR LOANS
Alongside a mortgage, a loan to purchase a car is one of the largest personal loans in terms of amount. You can finance a car in several different ways. In this guide, we list the types of car loans and briefly review general information about the different options.