The fact that a car is a necessity in most cases is probably not necessary to talk twice. Some of us use it more for private purposes, for others it is actually a working tool without which they could not even earn the necessary money to live. With the car we got used to going for family shopping, visiting relatives, bringing our children to schools and kindergartens, but we also go with him for trips or holidays .
Motorists’ experience speaks clearly: if you have already become a motor vehicle owner, you cannot imagine any further operation without this transport aid. However, the old car is more angry than it is, and it too often rests in car repair shops, and you know that its lifetime is no longer just pink. You need to rejuvenate your fleet by buying a new or reliable vehicle.
But the problem is the lack of money. Unfortunately, not every one of us will be able to save enough money so that we can pay off with a smile in the car showroom or car dealership for a longed-for four-wheeled steed. According to several statistics, about two thirds of Slovaks buy a car from borrowed money.
Regardless of whether you want to buy a brand new or used car if you do not have a sufficient financial reserve at the moment, you have basically two options to refinance your car. Either you buy a car for a lease or you take a loan on it .
Both types of car financing are commonplace today, and there is wild competition in the market. So what’s more advantageous – buy a car for a lease or take a loan to buy it? The answer to this question depends on the circumstances we will explain in the following lines.
TIP: If you need to borrow money to buy a new or used car, you can do so by completing a simple loan form on our site. It won’t take you more than ten minutes and you can have money up to 5000 euros in just 24 hours.
The difference between leasing and loan is owned by the car
If you decide to buy a car for leasing, it is basically also a form of loan, because you get money from a foreign source and you will have to return the total amount together with interest in regular installments agreed in the leasing contract.
However, the difference between leasing and classic borrowing – whether from a bank or a non-bank company – is quite fundamental when we look at the whole issue through an ownership relationship. We will explain immediately what we mean.
If you take out a loan from the car , you will enter into a loan agreement with the bank or non-bank, which will give you the necessary funds on the account, which you can then use to purchase your chosen vehicle. So, in a car showroom or in a car dealership, you pay the price of a car to them and thus you become its sole owner . So you sign up for the car and pay off the agreed installments for the loan.
If you take a car for leasing , the situation is completely different: in fact, you are not buying it, but just renting it. The owner of the motor vehicle is the leasing company itself for the duration of the contractual relationship resulting from the leasing contract. You will not become its official owners until you have paid the last lease payment .
When does (not) pay a car for leasing?
Taking a car for leasing is undoubtedly a convenient and used solution when buying a car. But not always and for everyone it pays equally! We recommend leasing rather than buying a new car , as you are less in interest than a bank or consumer loan in a non-bank company.
However, if you would like to purchase a used vehicle for the lease, the situation is slightly different and is more of a loan. In the case of used cars, leasing companies have significantly higher interest rates than new cars . They range from 15 to 20 percent, but the situation is not the case when the interest rate exceeds the 20 percent. This is because leases of interest in the “payroll” also include the risk associated with their sale. For example, if you did not properly repay the leasing installments and the leasing book would take you away from the car, poor technical condition can significantly reduce its resale value.
It is also important to note that if you hire a car, even a used one, you will have to pay compulsory, but also accident insurance . And that is the case for an older car with a value of 1500 to 2000 euros, more or less an unnecessary investment, which will unnecessarily overpay for the lease.
A certain disadvantage of leasing compared to a loan may also be the obligation to pay for a car for a down payment, that is, a certain initial amount of the total price of the vehicle in cash (the financiers tend to also speak of a share in the purchase price of the vehicle). For example, if you buy a car worth 4000 euros, you will have to pay a 20 percent down payment, which is 800 euros. If you don’t have such an amount, it may be a problem.
It is true that strong competition today forced most leasing companies to offer cars for leasing with very low or even zero down payment, but financial mathematics is also relentless in this case. In fact, the lower the down payment, the higher the interest on the lease ! So if you have not saved the reserve for paying as high a down payment as possible, do not count with a large difference in interest rates compared to conventional non-purpose loans. At that time, it is interesting for you to have a car loan .
When is the car more favorable for the loan?
The indisputable advantage of leasing compared to a loan is, for example, that leasing equipment is associated with less bureaucracy. When buying a car for leasing, in most cases, it will be enough to present a civic and driver’s license and provide a contact to the employer, or if you are a sole trader, also a trade license and sometimes a complete tax return (or statement of account for a certain period, most often the last 3 months) ).
If you would like to equip a purpose-free consumer loan at a bank , then use the borrowed money to buy a car , it is one of the best solutions, especially if you buy a used vehicle. Or even if you do not have any saved amount available that you could pay in the form of a leasing company down payment, which would allow you to achieve a more favorable interest rate than a consumer loan.
Banks offer lower interest rates than non-banking companies (although the difference is not as profound as it used to be in the past), but the fact is, you will have to wait a while to approve a bank loan and before it taps it , you will have to earn revenue from it and, in addition, spelling in credit registers . In addition, you need to take into account some form of loan security, most often you will be guaranteed by a bill of exchange or by car.
If the bank evaluates your creditworthiness (that is, the total solvency, which is a signal indicating the potential risk of defaulting on the loan), or you will have a negative entry in the register (sometimes it is enough that you have only delayed repayment once for another loan), for money you can forget from the bank!
Solutions from such situations offer loans from non-bank entities , which are somewhat more expensive than those from the bank, but when assessing your creditworthiness, they will “measure” you with a much more benevolent meter and will not either look at the registers at all, or they will be able to “take no note “The fact that you once met a little while on repayment and does not turn your back on it immediately.
TIP: Borrow the money you need to buy your new or new four-wheel helper through our online form . Without proof of purpose, no guarantee, no registers and unnecessary forms and confirmations! You’ll get everything up quickly behind your computer monitor and you can have a loan of up to € 5,000 within 24 hours. With the handy online calculator, you can determine the amount and frequency of repayments yourself (from 12 to 60 months) and always see exactly how much the loan will cost you.
Final quick comparison:
- interest is generally lower than for loans
- however, the interest on leasing used cars is higher
- it is necessary to pay the down payment – it can be zero, but it will unnecessarily overpay the entire lease
- easy documentation and quick approval process
- the car is up to the full repayment of the leasing owned by the leasing, which can take it off for repayment problems
- higher interest than leasing (however, this difference is minimal for used cars)
- you can borrow an amount to pay off the entire purchase price of the car (= no need to be saved)
- For a loan in a bank, you need to count with the registry review, your creditworthiness assessment, as well as the loan security (= liability)
- very quick approval and sending money to your account (within 24 hours online loans )
- you do not need to document the purpose
- when you buy a car with borrowed money, you become its unqualified owner