If leasing remains the best known solution for the acquisition of a vehicle, car credit is sometimes just as attractive. Cost remains a central issue, however, and many drivers question the real price of a car loan. In the end, what price can we expect? Our analysis.

Compare what is comparable

Compare what is comparable

Before studying more precisely the cost of a car loan, it should be remembered that a loan is not a leasing. The prices are therefore not comparable as is. Indeed:

  • The cost of leasing only includes the “rental” of the vehicle. At the end of the contract, the vehicle does not become the property of the driver.
  • The cost of credit includes interest, but also reimbursement of the vehicle. The monthly payments are higher, but the vehicle belongs entirely to the driver.

Elements of cost

Elements of cost

A car loan comes in the same form as a consumer loan. A financial institution, generally a bank, makes a certain amount available to the buyer which will then be used to pay for the vehicle. The fixed monthly payment then includes:

  • A share which corresponds to the repayment of the loan itself.
  • A part that understands interest. This interest depends on the amount borrowed, but also and above all on the repayment duration.

It is important to understand that the interest paid for a loan is proportional to the duration of the loan. A credit over 6 years will cost, in interest, twice as much as a credit over 3 years.

Interest rate and calculation

Interest rate and calculation

The actual cost of the car loan will therefore depend on the rate charged and the expected repayment period. The credit will therefore be all the more advantageous as it will be repaid over a shorter period. As an example, here are some figures corresponding to a loan of 20,000 USD.

Monthly *Cost**Monthly *Cost**Monthly *Cost**

Rate 12 months 24 months 36 months
Rate 12 months 24 months 36 months
5.9% 1’719 USD 628 USD 884 USD 1’219 USD 606 USD 1’821 USD
6.9% 1’727 USD 732 USD 893 USD 1’424 USD 616 USD 2,130 USD
7.9% 1’736 USD 836 USD 901 USD 1’628 USD 623 USD 2,439 USD
8.9% 1’745 USD 939 USD 910 USD 1’831 USD 632 USD 2,747 USD
9.9% 1’745 USD 1041 USD 918 USD 2,034 USD 640 USD 3,056 USD

*: includes credit repayment and interest

**: total interest paid for the loan

The choice of car credit

Opting for a loan rather than a leasing will depend essentially on his preferences and his budgetary capacity. Indeed:

  • Over a short period, credit is generally more advantageous than leasing. To this calculation, it should be added that the interest on the credit is tax deductible (which is not the case for leasing costs).
  • Over a longer period, interest on the loan quickly becomes high.
  • Credit allows you to be the legitimate owner of the vehicle, although it often involves a higher monthly payment.

A better rate

A better rate

When making a loan, the interest rate is usually determined by the situation of the borrower. A risk-free situation will thus be accompanied by a more advantageous rate. On the contrary, a borrower with a “borderline” situation will be assigned a higher risk, and therefore a disadvantageous rate. It can however be useful to go through a credit intermediary. He will be able to advise his client and defend the case with the banks to obtain a better interest rate. In the case of car loans, Autocredit offers the possibility of studying each file free of charge to propose an individual offer at the best rate.

Leave a Reply

Your email address will not be published. Required fields are marked *