To effectively compare financing offers issued by credit organizations when buying a vehicle, two solutions are available to you:
- call a broker;
- compare offers by yourself.
Regarding this second point, the best way to compare two auto credit offers is, first of all, to present the same project to the financial institutions to which you apply.
The simulations will have to show the same amount and duration that you will have beforehand, determined according to your needs. You will then need to identify the type of loan and select an interest rate to compare monthly payments.
Then you will add the cost of the loan insurance as well as any fees.
Annual Effective Rate (APR)
The APR must appear on your car loan offer. The rate offered by the lender will depend on your profile and your request. Know that the interest rate is the remuneration received by the banker.
This rate can not exceed the ceiling of the rate of wear fixed by the law. If you have a solid case (low debt, professional situation and stable income, personal contribution, guarantees, etc.), for the financial institution the risk is lower.
On the other hand, if your profile is more risky for the lender, the lender will increase the credit rate to compensate for this risk.
Also compare two rate formulas with the same variability. An invariable rate (fixed rate) will always be more expensive than a variable rate, however it will be safer for you.
On the other hand, a variable rate will be cheaper for the borrower but with a higher risk. Indeed, in the event of a rise in rates, the amount of monthly payments will increase in the same proportion. Your monthly cash budget will have to be able to support this eventual increase.
The rate is often mistaken as the essential criterion when comparing two credits. Indeed, on short credit periods, like 4 years for example, if the rate is slightly higher or lower, it will only correspond to a difference of a few euros per month.
The cost of insurance
Insurance on a car loan is usually optional.
Although some financial organizations do not charge a fee, stay alert on this point. Only if you act on the offer will they be liable.
By totaling all these positions, you will get the total cost of your auto financing. This as well as the overall effective rate are indicated on the offer of the financial institution.
Because of the multitude of credit offers available on the market, all the above mentioned elements are important because it is often difficult to compare several offers on the same basis.
Auto credit installment
In addition, the loan arrangement (deferred amortization, several lines of credit, etc.) can influence your choice.
Finally, the total cost of a credit is not the only parameter to take into account. Other benefits or services will likely be offered by financial advisors. You will, of course, take into account their cost but, above all, only subscribe them if they are really necessary.
After signing the credit offer, you have a 14-day withdrawal period. The law requires that a withdrawal form must be attached to the prior offer of credit.
Credit rates of financial institutions and banks are constantly changing according to their commercial policies.
You therefore have every interest in comparing to benefit from the best credit offers available on the market.