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Used car loan – where is it cheap?

I rented new cars on my travels in Northern America multiple times. But for my business and personal use at home I have always bought used cars so far.

Purchasing a used car in good condition is economical and makes sense unless one’s car is also a hobby or bought as status symbol.

The average price of used cars, which have been sold at Germany’s biggest marketspace this year, is 25,711 euros. Considering the current interest rates, it is often worth to finance the car with a loan so that more profitable investment assets can remain and continue to work for their owner.

Of course there are also many households who have to finance a car with a loan, because they could not afford it otherwise.

A loan comparison is (also) important for used car purchases

In these cases it is even more important to compare loans, because every euro that is not paid for interests can be used for more important things.

used cars: credit calculator

Important: enter your personal data in the comparison tool in order not to get to see “showcase interest rates”, which are only attainable with the credit scores. After you have entered your personal data you will only be shown credit lenders, which would provide a loan based on your data. This makes the choice simple. Of course you will only be shown the real interest rates corresponding to your creditworthiness.

If one looks at the comparison at Smava for a 25,000 euro loan and a duration of 6 years (which is often chosen for used cars and relates to the expected operating time), one can see a monthly interest difference of 50 euros on the first comparison page already.

This would be 3,600 euros over the whole course!

To have or not to have 3,600 euros? You will certainly have ideas what you could do with this amount, if you could save that much.

More potential for saving money with car loans

Of course there is even more potential for saving money, because the 50 euros a month were the difference between decent finance providers. Someone who takes out a loan without comparison could lose a five-figure amount!

If one can afford to squander that much, one could have also gotten a new car instead, because the average price of sold new cars at is 36,340 euros.

How would I do it?

I do not plan to buy a car soon, but if I did, I would definitely check financing the car with this credit calculator specifically for car loans.

Depending on one’s financial mindset it could be smart to finance long-lasting commodities for the planned service life with a loan rather than to withdraw money from other investments, especially if the low interest rate environment persists.

For example, the predicted rate of return of my forest investment exceeds the interest rate for a car loan. It would be financially unwise to sell the trees prematurely to buy a car.

I am not a huge fan of leasing by the way, because leasing contracts often include hidden higher interests and fees. Additionally, customers are often suprised about extra costs for the driven distance and alleged or real damages when they return the car.

I like things, which I own myself* – even when they are financed with outside capital.

*Some of our readers own vehicles indirectly, because they belong to a company or foundation in the first place, but our readers have the control over them in the end.

Important advice for used-car loans

Get the loan before buying the car.

Yes, there are people who sign a car deal subject to a credit approval. But this puts unnecessary pressure on them. In the worst case they do not get the loan and all sides end up with hassle and disappointment.

In the second worst case they get an expensive loan, if they perhaps informed their (local) bank that they signed the purchase contract and need the loan now.

Online credit comparison makes sense

The best is to use the loan comparison calculator and enter your personal data. Only then you will get useful offers by multiple banks that are tailored exactly to your credit worthiness.

You can still decide then whether you go up 5,000 euros when signing the credit or whether 5,000 euros less would also suffice.

But you have your loan agreement. Many banks will transfer the loan to your checking account and give you multiple weeks time to provide a record of your purchase of a car.

It is not a problem, if you get a 30,000 euro loan and make the purchase for 27,500 euros due to negotiating a good deal. You can keep the difference or spend it for other causes that do not need to be recorded with the bank or – depending on the agreed terms for unscheduled repayments – you can pay the money back immediately to be finished with the loan earlier.

When in doubt, due to the current low interest rates I would rather apply for a loan that is a little bigger and use excess money for something worthwhile or make an unscheduled repayment.

That would definitely be better than having the numbers the other way around: getting a 27,500 euro loan and then realizing that the car can only be bought for 30,000 euros. Increase the loan or get a second one? – neither is as comfortable as the former strategy.

Questions and experiences?

As always I look forward to the smart exchange of ideas with you and our community concerning financing long-lasting commodities such as with a car loan in this case.

Do you recall these topics?

Maybe you know someone whom this article would help

If someone gets a good loan for a used car due to this article, I would be happy to get feedback including a photo (will be published in the comment section). There will be a small surprise thank-you gift (also to be published). This offer is good till cancelled.

Richard Banks in Florida with cars

Richard Banks with a rented business car during a seminar week abroad.

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Who writes here?

Richard helps people through this special portal to find bank products in Germany and abroad and shows how to use them optimally. You can register as a “fan” and, by doing so, watch even more instructions and videos.

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