Financing a car, an expensive hobby

Financing your car: Looking for a beautiful car, second-hand or new? Now the most important thing, the financing of a car. Are you going to borrow money or? We help you on your way, literally and figuratively with or without a car loan.

Of course we all dream of a sparkling new car, but a car is expensive to purchase and maintain. The first question to ask yourself, can you pay for the recurring costs of your car yourself? These cost items can differ enormously per brand, version, year of construction and your personal circumstances such as residence and claim-free years for your car insurance. Think of:

  • MOT
  • Car insurance
  • Fuel
  • Motor vehicle tax
  • Standard maintenance

If you can reasonably manage these costs, you are rightly looking at how you can indeed borrow money for a car in the most favorable way possible.

Financing your car yourself is the most economical way, use your savings. The return you miss out on on your savings does not outweigh the costs of borrowing money for a car. However, what is increasingly common is that the financing of a car consists of three parts:

  1. Trade-in value
  2. Deposit savings
  3. External financing

To illustrate, the purchase of a new Volkswagen and trade-in of an older model:

Purchase amount: 32,000
Trade-in value: 11,000 -
To fund: 21,000
Savings 10,000
External financing 11,000

The most expensive way to finance your car is through an "outside financing" popularly known in this situation as a car loan. The interest on a car loan can be compared to a personal loan and this form of consumer credit is pricey, as there is no immediate and usable collateral.

If you have the choice to finance a car, it is first advisable to see what monthly costs the model you love entails. Then honestly see what amount you can spare on your savings account and what extra monthly costs for a car loan you can handle.

Financing offered from your car dealer can in some cases be a worthy alternative to a car loan. Introductions of a new model can be accompanied by an interesting financing proposal or a deferred payment. Always pay attention to the conditions here, it is a well-known trick to not charge interest for the first year and then still create a substantial profit for the financier with usurious interest.

More generally, make sure that the term of your car loan matches the expected lifespan. Have a cheap car loan for 10 years and your car will not last longer than 8 years? An unwise choice.

Special products that lenders offer you are a personal loan (to be used to finance any good, including a car) and there are providers who can offer a cheaper car loan by settling the residual value in the loan sum.

Driving is expensive enough, especially financing a car. An old Dutch saying is no better here " Look before you leap ".