Car credit is still today the most popular solution for the French to buy a car. It allows individuals not to pay a large sum in one go and can apply for a new or used vehicle.
The principle is simple: the credit is repaid monthly and according to the terms agreed with the lender, whether it is a bank or a specialized establishment.
How does classic auto credit work?
In France, the interest rates charged for car loans are generally cheap: they hover around 6% over 4 years. The repayment tenure is fixed, which allows you to organize your finances. It can be spread over a more or less long time depending on the case. As soon as the loan is granted, the borrower legally owns the car.
Advantages and disadvantages of renting with purchase option
- The amount of monthly payments is lower than that of a car loan: one pays the use and not the property. These lower costs allow individuals with low repayment capacity to easily have a vehicle.
- LOA is a flexible solution that allows you to change vehicles as you wish.
- The duration of the contract and the mileage are defined according to the needs of the tenant.
- Exceeding the mileage fixed on the contract can be costly.
- Even if he is not the owner, the tenant is legally responsible for the rented vehicle.
- When the LOA contract comes to an end, the user will pay more to acquire the car than if he had bought it on credit from the start.
Advantages and disadvantages of car credit
- The car loan is adjusted to measure: the amount of the credit and the duration of the repayment are decided according to the financial capacity of the buyer.
- The reimbursement is made by fixed monthly payments, which allows you to organize your finances.
- The car loan can be partially or totally settled when the owner wishes: he then recovers the full amount.
- Once the credit application is accepted, the borrower immediately owns his car and can make the changes he wants.
- In the event of breakage or theft, the monthly payments must still be paid, even if the buyer does not have insurance.
Which purchasing method to choose?
Purchase on credit or lease with an option to purchase? The choice depends on the profile of the buyer. The LOA allows people with low repayment capacity to be transported without having to go through conventional financing methods.
This option can, therefore, be of interest to people who need a car without wanting to invest. But the main drawback of leasing is that, in the long term, if the tenant wants to become an owner, he will pay more than if he had bought on credit.
Regarding the purchase on credit, it is possible to make a loan simulation in a few minutes thanks to our simulator below. Good to know: taking out a car loan is more advantageous if you have funds at the start and you are sure you can repay the loan every month.