Auto credit is no longer the only financing solution. Leasing and long -term rental are possible alternatives. To make the right choice, here is an overview of the advantages and disadvantages of these three formulas.
According to the automotive observatory, the implementation of the bonus-malus on polluting cars (read our explanations) should revive automobile sales. But at the same time, French households reduce the share of their expenses dedicated to the car. In 1996, they represented 4.4 % of the household budget. Ten years later, they are 4 %. In parallel, the number of kilometers traveled, too, bent over the same period, going on an average of 14,030 km to 13,012 km per year. So many new parameters that justify a comparative study of the various financing solutions.
Credit purchase
The purchase of an automobile is most often achieved thanks to the granting of a credit, known as affected. A formula that can prove to be unusual. By using a credit institution to finance the vehicle, the borrower cannot use the amount granted to another use. Moreover, in the palette of interest rates, there are specifically rates for car credits, which do not have at all the same level as those for real estate. When real estate credits at 15 are around 4.6 % (early March 2008), those of a car credit are between 6 and 9 % for a period of 24 to 60 months.
One of the advantages of a car loan is that it cancels if the vehicle is not delivered. This requires beforehand to have concluded with the concessionaire, a prior offer, where the funding method will be indicated precisely. Even if the latter is not provided by the partner credit institution of the dealer. Indeed, if a car merchant can offer a financing solution, banks and other credit institutions can do the same to provide all or part of the funds necessary for the purchase of an automobile.
Once the vehicle has been delivered, credit refund can start. The management of this credit turns out to be relatively flexible, but not without consequences for the amount of interest to be paid: increase or drop in monthly payments, postponement or early repayment (read our advice). Another peculiarity: in the event of unwanted unpaid, the credit institution may request the seizure of the vehicle and sell it at auction to settle part of the remaining capital. Finally, in the event of a claim, an option in insurance guarantees may provide for the amount of the remaining credit, if the vehicle is declared as irreparable.
Rental with purchase option
Faced with the rise in petrol prices, the daily use of the car tends to be reduced in particular in large cities. We must also take into account the evolution of pollution legislation. In short, becoming the owner of your vehicle is not necessarily the best solution, even less via a credit, since it is not an investment. The price of an automobile does not improve through time. As proof, from the first year, a new vehicle loses an average of 25 % of its value.
In other words, for a driver who likes to change car very regularly, purchase is a solution to be not recommended. It has every interest in studying rental formulas with purchase option, for example. It is also called “leasing”. This is a rental contract with an option to buy the vehicle. In this way, it is possible to circulate with an automobile, which is not the property of the driver but of a leasing company or a concessionaire, in exchange for a rent. The latter does not include registration, maintenance costs or vehicle repairs, which are options to add. Likewise, it is concluded for a number of kilometers fixed in advance. In case of exceeding, there will be additional invoicing.
Upon signing the contract, a security deposit must be paid representing a share of the price of the vehicle. This amount varies from one company to another. Added to this is an insurance of “all risks damage”, which allows in the event of an accident, destruction, or theft of the automobile to take care of the amounts of rents remaining to pay. Arriving at the end of the contract, that is to say after 6 months to 5 years depending on the case, you have the choice: either to renounce the purchase option, make the vehicle, and recover the security deposit, or become an owner by adjusting the amount of buyout provided for the signature. This formula can soften with an anticipation outing after a few months and clauses can authorize a repurchase of the vehicle to easily change every 2 or 3 years.
Long -term rental
The best formula for often changing vehicles is long -term rental. It offers great flexibility with a series of services included in the monthly rent which allow for example to no longer worry about the maintenance or repairs of the vehicle. Better still, in the event of immobilization of the automobile, you immediately have a new vehicle. In return, the long -term rental rent is more expensive than the deadline for car credit or leasing. However, the amount of expenses is known whatever the vagaries encountered, which allows you to control your budget. For this, it is necessary to carefully check the different options offered.
For rent, you agree to use the vehicle for a period but also a given number of kilometers. This implies being able to consider with accuracy the use which will be made of the car so as not to pay too much if you make a lot less kilometers than expected or on the contrary to have to adjust a kilometric overtaking. However, given the maintenance costs and the vehicle discount, long -term rental is the right solution for financing a vehicle, especially if you do little with an automobile, as is more and more the case in large cities.