For the purchase of a new or used car, cash purchases are becoming rarer. There are different means of financing and, among them, the famous car loan offered by online banks and some neobanks.
Like real estate loans, online banks and neobanks have taken up the car loan theme by offering offers comparable to those found at most traditional banks. This is also an element taken into account by most car manufacturers who also offer their own financing services to the point that spot prices are barely moving in a booming electric car market.
LOA, LLD, Auto Credit: What are the differences?
Rare are the customers who buy their new car with cash. In the vast majority of cases, these cars are financed through an LOA or through an LLD or a classic loan from a bank or directly from the manufacturer. In the latter case, it should also be noted that dealers are usually affiliated with a bank, since they do not have a banking license. Then we talk more about lease than credit. It’s also a way for manufacturers” have » a customer with your brand over time.
Let’s first take the Lease with Option to Purchase (LOA). This is the most popular financing formula, undoubtedly because it is similar to a more classic consumer loan that allows you to buy or not the vehicle at the end of the contract. The advantage is that the resale price is set at the start of the contract, the consumer then places a bet on the future odds of his vehicle, and can win by buying the car at a lower price compared to the market. However, the exact opposite can also occur. The contribution is also more important than the other financing modalities and maintenance and insurance are not included in it. There may also be reconditioning costs depending on the condition of the vehicle.
Then comes the LLD (long term rental). This is the most captive offer, and therefore the most profitable for manufacturers. On the other hand, it is not without interest for the customer who does not want to have to insure himself the maintenance, the resale of his car and additional services such as insurance or maintenance. The key feature of the LLD refers to the fact that the car is well rented for the duration of the contract and does not belong to the customer who will have to return it at the end of the lease. Inevitably, the monthly payments are higher than with an LOA. This method of financing should not be seen as an investment, but rather as a use value, like paying real estate rent to an owner. The advantage for the customer is that he will be able to drive a new vehicle regularly by changing models without having to pay part of the price of the car. Be careful, though: the terms of these offers are often different depending on the manufacturers who may charge additional costs such as repairs or excess mileage.
Finally, the last option, the one that interests us here, is the car loan offered by banks. It could look like thelease(or leasing), but it is above all a consumer loan. Therefore, it is up to the buyer to make arrangements with a bank to obtain a loan corresponding to the price of the vehicle (new or used) and to ensure the monthly payments. The vehicle is then purchased for cash from the manufacturer. The buyer owns 100% of his vehicle and can resell it at any time while ensuring the repayment of his loan. This is quite a significant financial advantage compared to an LOA or LDD, but it also implies that additional costs are covered by the client, i.e. maintenance or registration certificate. Some manufacturers are also directly the point of union between banks or credit organizations, only to have to deal with a single intermediary. On the other hand, it is advisable to spend some time comparing the offers of online banks and neobanks that offer this type of credit.
What banks offer car loans?
Banks have integrated the purchase of a new or used vehicle into their credit products. In the case of these so-called creditsfor consume“, it is important to take a good look at the”annual percentage rate of charge(TAEG), or the total cost of credit for the consumer. It is expressed as an annual percentage of the total loan amount. We carried out a test in 4 banks with the same examples to compare offers and rates:
- A used vehicle at 7000 euros for 36 months
- A new vehicle at 35,000 euros over 60 months.
Hello Bank allows you to take out a car loan from 5,000 to 75,000 euros within a period of 4 to 72 months. For example, for a used car loan of 7,000 euros for 36 months, the APR is at 5.71% and monthly installments at 211.59 euros. For a new car loan of 35,000 euros for 60 months, the APR is at 4.9% and the monthly installments amount to 657.13 euros. You can run your simulation directly from the Hello bank site.
The neobank works in collaboration with specialist credit partners. In France, it is Younited Credit. The N26 car loan allows you to finance a new or used vehicle, from 1,000 euros to 50,000 euros. Let’s take the example of a second-hand vehicle at 7,000 euros for 36 months, the APR is set at 4.59% and monthly installments at 148.73 euros. If we go for a new vehicle at 35,000 euros over 60 months, the fixed APR is still at 4.59% and the monthly fees amount to 652.51 euros. N26 also offers its own simulator on its site.
The Boursorama Banque car loan is intended for individuals who wish to purchase an electric or hybrid vehicle, or benefit from an ecological bonus. Boursorama Banque offers Variable APR according to the amount and monthly installments with an amount of up to 50,000 euros at 72 months. Like the classic car loan, no contribution is required to obtain this loan. The bank does not charge application fees, which is not necessarily the case with traditional banks. For example, with a second-hand vehicle at 7,000 euros for 36 months, the APR is at 5.17% with monthly installments of 210.35 euros. If you take a new vehicle at 35,000 euros to be reimbursed in 60 months, the APR is in 4.07% and the amount reimbursed per month is 645.73 euros, which is substantially the same as in Hello Bank. Again, Boursorama offers its own simulator on its site.
The car credit at Orange Bank is reserved for its customers, so you will have to be a customer of the bank to obtain it. However, it is possible to carry out a simulation directly from the Orange Bank website without being connected. The site is also more accurate than the competition, because it asks for more information about the nature of the vehicle (used, green, motorhome, 2 or 3 wheels, etc.). The duration of the loans varies from 12 to 86 months and the amount ranges from 1,000 to 75,000 euros. If we take a used vehicle at 7,000 euros for 36 months, the APR is 4.10% with 206.10 euros of monthly payment. For a new vehicle of 35,000 euros in a period of 60 months, we obtain it is still an APR of 4.30% with 649.02 euros of monthly payment.
In broad strokes, these banks offer more or less the same rates and the same monthly payments for a loan of a few euros in our examples. Note that all these values They are only for commercial proposal, the final result is given during the subscription process with the bank.
Other online banks or neobanks also offer this type of credit. Again, if the simulators are generally reliable, the results may not be completely accurate given your situation and the requirements of the bank. So remember to contact your bank before you start.
But then, what is the best offer for a car on credit?
With the recorded end of sales of new thermal cars approaching, due to the European Commission ban scheduled for 2035, investment on the automotive side will make sense especially on the electric car side and manufacturers have already largely followed. measure the example with respect to the various means of financing. seen above.
In our columns, we have already proven that car credit (depending on the banks) had an advantage over financing for an LLD and more for an LOA. Credit has above all this advantage of becoming the owner of your car from start to finish, and thus being able to resell it as you see fit.
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