In this final stretch of the year, the number of people who decide to buy a new vehicle in installments increases greatly, as a result of the large discounts offered by dealers.
However, a recent study published by the financial comparator shows that financing the car with the dealer can be more expensive than doing it with the bank , as long as there is no good discount.
Bank Loan vs. dealership financing
As the aforementioned study shows, in 55% of cases, applying for a personal loan at a financial institution will be cheaper than going to a concessionaire . One of the main reasons is the interest rate that both apply, since the average is 7.03% APR in banks compared to 10.09% in dealers.
Here is a practical example. When requesting a loan worth 15,000 dollars to be returned in 60 months, at the end of the term the amount of 17,833.80 dollars will be paid to the bank. On the other hand, if the option of the concessionaire is chosen, the final price of the credit will amount to 19,162.20 dollars . So, in this example, by financing with a financial institution we will be saving 1,328.40 dollars.
Secondly, the myth that paying with car houses is cheaper thanks to discounts has been taken apart. After the analysis carried out by Good Finance, 40% of the dealers analyzed also apply some type of discount, even if they are not financed with them . Well, it is also true that, as they themselves say, there is in most cases an extra price reduction if financed with them. Given this dilemma, it is always advisable to study the different options and make calculations in order to verify the most economical option.
The dealer discount trap
One of the biggest problems reflected in the study is the low transparency presented by dealers. 55% of the offices analyzed included additional services without asking for it , increasing the final price of the loan. In addition, the commercials, on numerous occasions tried to hide important data such as the interest rate or the cost of the coverage of these services.
Consequence of the aforementioned factors, knowing the final price of the vehicle becomes practically impossible. A real example was the presentation of two different financing for the same car and without any justification.
This 2018 flexible financing, also called leasing , seems to have become fashionable. In the study carried out by the financial comparator Good Finance, it is observed how 70% of the dealers try to sell the lease over the traditional loan , in order to keep the consumer linked for more years.
But what is meant by leasing ?
Flexible financing, also called preferential, premium, etc., is a financial rental where a vehicle is acquired in exchange for the payment of very small fees, but with which we only amortize approximately half of the outstanding capital. A
t the end of this period, the customer will have a last installment to pay a high amount and must choose between what to do with the vehicle, within the three options offered by the dealer: return the car, change it for another model or keep it paying the latter high fee, which can be refinanced.
However, all that glitters is not gold . By not owning the vehicle, dealers can establish restrictions such as the maximum kilometers to be made or even force the client to pay additional services. Therefore, from Good Finance it is always advisable to analyze and compare both types of financing in order to choose the one that best suits the needs of each consumer.