Taking out a car loan when buying a car instead of paying cash is almost more the rule than the exception these days. But if you plan to go that route, it may make sense to think about what the loan will cost in interest.
If you manage to negotiate a lower interest rate, the difference in monthly cost can be significant, and We Car Owners have compared the interest cost of two car loans at different interest rates.
Interest cost of SEK 150,000 car loan
The first loan you look at is SEK 150,000, with an amortization period of five years and straight amortization.
The comparison shows that whoever manages to negotiate this loan down by one percentage point lowers their monthly cost by around SEK 64, and saves around SEK 3,800 over five years.
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Interest cost of SEK 250,000 car loan
The other loan you are looking at is for SEK 250,000, also with straight amortization and a five-year term.
The comparison shows that those who manage to negotiate down this loan by one percentage point lower their monthly cost by around SEK 106, and save around SEK 6,300 over five years.
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Beware of car loans from dealers
If, on the other hand, you received a percentage point higher interest on your car loans, the cost in the examples would instead rise by the same amount.
We Car owners also note that car buyers are often offered car loans directly by the car dealer when buying a car, which can both provide guarantees and a discount on service.
However, you have to be careful, as the interest rate is not always the lowest. Comparing with what different banks offer in terms of interest, and if there is any room for negotiation on these, can therefore make sense.
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Choose a short amortization period
According to Eva Lindströmlawyer at the independent Consumer Banking and Insurance Agency, it is also good to try to pay off your car loan as quickly as possible.
– Avoid spreading the cost over too many years, try to pay back in as short a time as possible. And don’t just look at the monthly cost, but at the total cost of the entire loan over the entire term. Most people only look at the monthly cost, she says We Car Owners.
We Car Owners have also created a tool where you can test how the monthly cost of car loans of different sizes and terms is affected if the interest rate is raised.
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