Yes, buying a car through a car loan is cheaper than car finance. It is because you may witness extra costs like a deposit on car finance that you don’t pay on a car loan. Moreover, the interest rates may initially seem interesting. However, the overall costs may surprise you. It is advisable to compare quotes while seeking car finance in Ireland‘s marketplace.
Focus on the dealerships that offer realistic rates. However, you need to choose between the finance type. With car loans, you can eliminate this hassle and own the car after paying the full amount. The blog discusses how getting a car loan is cheaper than financing it.
Car loan vs. Car finance: what’s the disparity?
Yes, these two terms, car loan and car finance, are different in meaning. Car loans are loans for vehicles where you acknowledge the car from the origin of the agreement. Alternatively, you can use the car to make payments in the car finance agreement.
Later, you can either exchange it, buy it, or return it to the provider. However, you cannot return or change the car in a car loan. Here are other potential differences to check:
| Parameters | Car loans | Car Finance |
| Will you own the car from the beginning? | Yes | No |
| Do you need to pay a deposit? | No | Yes |
| Do monthly payments stay fixed | Yes | Yes |
| Are there mileage restrictions? | No | Yes |
How is a car loan cheaper than a car dealership?
The key aim of any loan is to fetch the highest possible amount at the lowest interest costs and fees. However, this depends on a few aspects like your credit score, monthly income, expenses, and deposit you may provide. Before picking one of the two, you must know the pros and cons of each.
For example- buying a car through a car loan is cheaper than car finance in many ways. However, car finance offers the flexibility to switch vehicles after your tenure is completed. Alternatively, you pay for the same car throughout on a personal loan. Here are some ways a car loan may still be a better option :
1. No necessity to pay anything upfront
You generally get an agreement with the monthly instalments, loan amount, and the total amount to pay on a car loan. You don’t need to pay anything upfront, like a deposit on car finance. Instead, you can spread over the cost of the car purchase in easy-to-manage fixed monthly instalments.
Unlike a car loan, you generally pay 50% or half the contract’s value, even if you struggle to pay it off. It is when you must replace the motorcar. It becomes challenging for individuals and breaks the bank.
2. Save money on a car loan
Unlike car finance, where you must follow a specific rule, car loans free you from bondage. You don’t need to pay a specific % of the debt you owe mandatorily to get out of the loan agreement. Instead, if you want to keep the car but cannot pay, get new terms.
Yes, you may re-schedule the payments according to what you can comfortably pay. Always check for flexibility on terms when seeking car loans in the online marketplace. It eliminates the risk of losing the most desirable car. Some car loan providers offer the option to halt the payments, pay more when you can, etc., to suit your financial needs. However, you must reach out early to get the solution.
3. The interest rate remains fixed
The interest rates remain the same on a car loan, unlike a car finance agreement. It gives you more flexibility to plan your refunds and funding accordingly. Car finance quotes generally hold variable interest rates.
Thus, you may benefit from the low payments when interest rates in the economy fall. Alternatively, monthly loan payments can become costly when the economy encounters high interest rates. It may be 50-50% good and bad for your finances.
4) No need to provide a balloon payment
A balloon payment is the amount that you pay on the car finance agreement to own the car outright. It is paramount to do so after the loan terms end. Balloon payment is calculated by basing the car’s future value and the remaining balance on the loan. Yes, you generally prepay the balloon payment before the agreement ends. However, you must incur the costs.
for example-
- You determine to invest a car worth €50000 purchase price
- you get a 36-month contract with 0% interest (advertisement or introductory) and a €10000 deposit
- the expected importance of the motorcar after 36 months’ amounts to €25,000
- you will pay €25000 as a balloon payment.
You can either hand over the car keys or own it by paying €25000 to the car finance dealer. However, with a car loan, you don’t need to pay such payments. Instead, you pay only the interest and the total loan quantity by the end of the duration. After that, you legally own the vehicle.
5. No charge for driving the car an extra mile
Generally, you get the mileage units that you can legally cover with the vehicle until the loan term ends. However, you must pay the penalty or extra charge if you exceed that annual mileage limit on a car finance agreement.
You need to pay the dues at the end of the contract. This is generally clearly mentioned in your loan agreement. Therefore, always read the terms in fine print before signing up. The experts may charge 30p per mile or more, trusting on their policies.
You don’t incur any such costs with a car loan as you share full freedom to drive. There are no mileage limits. You just need to be regular with the monthly installments.
6) Guarantor may help fetch cheaper quotes
Using a guarantor or a third person on a car finance agreement may be beneficial. It helps you qualify if you lack the required credit score or a decent earning profile. A guarantor is accountable for the payments if the first borrower cannot pay. It thus acts as a security on the car finance agreement.
The car finance provider may provide you the opportunity to get the desirable car on finance pledged by the guarantor’s security. Yes, you may drive your dream car. However, qualifying for car finance with bad credit without a guarantor could be challenging. It is especially true when you lack a decent credit history.
Don’t worry; check car loans for better domination on the loan. You may get more options and better flexibility than car finance here. It could be challenging to get a car loan with bad credit with no guarantor requirement. However, you can co-sign the agreement with a person who earns well. It could be your married partner. It automatically drops the need for a guarantor.
7.Lower monthly payments
You may be shocked to know this, but you pay less on a car loan than on a car finance agreement. This is because car finance usually offers more competitive rates than a car loan. Moreover, you share more flexibility in reducing the interest you get on a car loan.
For example- you can choose a lower amount to borrow. You can even pay extra if the loan provider allows it. It reduces the interest and the monthly payments on a loan. Alternatively, a car loan provider seeks to build a relationship with the borrower. You may seek help to understand the best ways to reduce the monthly payments. The experts may help you by leveraging their years of experience.
Bottom line
These tips reveal how buying a car through a car loan is cheaper than car finance. A car loan provides much more flexibility on payments than a car finance. It helps you split the cost of the car purchase into easy and equal monthly instalments. You don’t pay extra unless you miss a payment. Moreover, you do not need to pay balloon payments, deposits, or extra mileage charges for driving. Instead, you may stick with the basic loan agreement instalments to get the car.
