The different variants of car financing – Car loans

 The number of cars on German roads is increasing and increasing. Various reasons such as work, family or an unfavorable connection to public transport or simply the desire to be mobile mean that more and more people not only need a car, but also buy it. Since the purchase of a vehicle is very cost-intensive, it is increasingly done in the form of financing, for which there are various variants. The big advantage of all car loans are the usually much more favorable conditions than with other consumer loans. This can be explained primarily by the fact that credit institutions usually have the vehicle overwritten as security against a loan default. 

 

Classic car financing via bank or car dealership

A variant is the conventional loan, in which the purchase price is included as the loan amount and the payment is made in constant monthly installments until the entire debt is repaid. Such a loan can be taken out cheaply, for example, by a loan comparison, in order to use the dealership’s special conditions when making a cash payment. In the meantime, however, many car dealerships also offer loans through in-house or cooperating credit institutions, the conditions of which should also be compared with other forms of loan. An alternative is the so-called balloon financing. Monthly installments are also paid here, but part of the loan amount is due as a final installment at the end of the term. 

 

3-way financing as an attractive alternative

Another form that can be very interesting for the vehicle purchase is the so-called 3-way financing, which in a way represents a type of leasing or at least has certain parallels. The three ways consist of a down payment at the beginning of the financing, a subsequent installment payment and a final installment at the end of the chosen term. This financing is characterized by lower rates. However, at the end of the term, the usually not negligible final installment has to be paid in order to finally complete the purchase of the vehicle.

But here is the further specialty of 3-way financing, because there are three variants available, which means that the name 3-way financing can be used twice. Because the final installment does not have to be paid in full in order to finally take ownership of the car. A new loan can also be taken out to finance the final payment. As a third variant, the borrower can also do without paying the final installment if he has decided to simply return the car. It is therefore a very flexible way of financing a vehicle that everyone can adapt to their financial options.

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