Coming September it will be a year since the AFM curtailed the offering of 0% interest rates for car loans. The AFM was of the opinion that a 0% interest financing was “misleading”. Borrowing always costs money. This offer implied something else despite the use of the mandatory slogan “Attention! Borrowing money, costs money”.
These loans meant in practice hidden (high) costs for the consumer. For car dealers, too, the sun goes up after all. AFM proposal to car dealers: offering low interest rates is permitted but no interest rates of 0% or close to 0%. Which alternatives do car dealers offer their customers as financing one year later?
Personal loan most used financing form car
The most common form of financing for a car is a personal loan and then most consumers opt for a five-year term. They want a term that matches the economic life of a car. You want to avoid having to incur costs for a car that has been written off or has already been sold.
The choice for a personal loan is easy to explain because of the certainty you receive. You have paid off the loan in full on the due date. Furthermore, the interest rate is historically low and you secure this with a personal loan. The demand for revolving credit as financing for a car has therefore clearly decreased because the interest on the credit is variable. And unlike old loans, nowadays even with a personal loan, additional repayments are permitted free of charge. For loans with old conditions, a fine always had to be paid in the event of extra repayments. The bank went wrong in calculated interest income and charged a penalty interest.
Car dealers still offer (for them) lucrative forms of financing to their (future) customers.
In addition to the possibility of leasing and buying on installment, they offer the 50/50 deal . That means paying half when purchasing , you can pay the other half in installments at an agreed interest rate.
The advantage for a car dealer is that they already have the consumer in their showroom and can immediately make a financing offer. It is tempting to arrange everything through the dealer. But is that also in favor of the content of your wallet?
If you want to drive a new car but you don’t want to buy it, you can lease a car. You do not become the owner of the car; you rent it. You pay a monthly amount and furthermore you only pay the gas costs. The moment you enter into a lease contract, this agreement is registered with the BKR. If you are going to take out a new mortgage, this amount has consequences for your maximum mortgage amount.
Buy new car on installment
Buying an installment car, “buy now, pay later”, is actually taking out a loan. But with the big difference that you are the owner of the car with a loan, in the case of an installment purchase you will only be the owner of the car after you have paid the last installment. Car dealers charge high interest rates for this option and you are often required to take out supplementary insurance.
Since the ban on 0% loans, car dealers are still offering the form of financing, the 50/50 construction. You pay half of the car at the time of purchase. For the remaining 50 percent of the amount, you have 12-48 months to pay the outstanding amount in fixed monthly amounts at an agreed interest rate. Car dealerships seem to be pushing the limits again; promotions are currently being offered to pay off the second part of the costs at 0% interest. A loophole?
A year later, it seems that car dealers are complying with the September 2016 ban imposed by the AFM. But what will the AFM do with the latest 0% promotions? Are the dealers ticked or are the promotions allowed?
Financially finance your car
If we compare the facts, the most advantageous loan form for a car loan is a personal loan. Are you curious about the low monthly charges that we can offer you? Easily calculate it yourself and request a quote. We work quickly and discreetly and we treat your personal information strictly confidentially. The application process is digital so no unnecessary phone calls or advice agreements.