The majority of people who wish to purchase a car choose to have it financed.
That is potentially very interesting, but what exactly is the best time to pay a car credit? Is it now the most interesting to limit this term as much as possible or can a little extra breathing space (financially) do no harm? We would like to go into this in detail and we searched for you in which time you can best pay off your car loan .
Credit term depends on your personal choice
The purchase of a car can be a considerable investment. This ensures that almost everyone who wishes to buy a car chooses to have it financed by, for example, a bank or another financial institution. For which term exactly is chosen depends on several factors including not in the least your personal preference. This is because a lot of personal influences will directly and indirectly influence the amount of the monthly installment. For example, how much reserve do you currently have when you pay all fixed costs? Do you prefer to pay off your credit as soon as possible or do you prefer a longer installment?
The two options you have in principle both have their own advantages and disadvantages. Do you opt for the short pain and do you pay your car for a period of, for example, 12 or 24 months? In that case, you will be confronted with very significant monthly amounts, but it is true that the interest remains within the limits. Do you prefer to repay your loan over a longer period of 36 or 48 months? Then the monthly amounts due are suddenly much more accessible, but you will always have to pay a lot more costs at the end of the journey.
Comparison of installments of 24 & 48 months
At the time of writing it can be established that Beobank (not surprisingly) uses the sharpest interest on the market for a car loan. The interest charged by this bank is 0.65 percent . It is worthwhile to compare the costs at different maturities with each other. When we do that, it quickly becomes clear how far the costs to pay can be different. We take a purchase price of 15,000 euros for your car for this example. When we simulate these for a 24-month repayment term, we see that the monthly amount comes to 629.22 euros . Do you prefer a duration of 48 months? In that case the monthly repayment is located at 316.65 euro . With a term of 24 months , a total interest of 101.28 euros is paid. Do you still prefer a payment period of 48 months ? Then the final cost price will be € 199.20 .
Be aware of the maximum duration of your car loan
The moment you choose to apply for a car loan, you have to take into account that you can be confronted with a certain maximum duration. Have you, for example, chosen to purchase a second-hand car for an amount of 2,500 euros? In that case, the credit amount may only be repaid over a maximum period of 24 months. Is there an amount of at least 10,000 euros? Then a repayment term of a maximum of 48 months is possible. Potential borrowers who want to borrow 50,000 euros for their car can do so over a period of up to 72 months. Again, as has already been shown on this page, the maximum repayment period is often not the most interesting.
What does the bank usually advise itself?
When the banks want to give you a solid and objective advice, they usually suggest that it is advisable not to spread the repayment period of your car over an excessively long period. The majority of lenders also indicate that four years for paying a car in the average price category is optimal. In this way, the borrower usually still has sufficient financial breathing space while the costs can still be kept within limits. On the other hand, it is often in the interest of the borrower to keep the duration of a (car) financing as short as possible for the following reasons:
1. A short term guarantees you the lowest costs for your car credit;
2. Does fate happen and do you have a serious accident with your car that explains this total loss? In that case, you still owe the remaining amount of the car to the bank. Have you then opted for a considerable repayment term? Then it can be very difficult to buy a new car.
Keep in mind the difference between new & second-hand
Finally, it is still important to take into account the difference between a second-hand and a new car. Do you prefer a used vehicle? Then you will notice that the interest for such a vehicle is usually a lot higher compared to a new one. In practice, however, that does not stand out because people are mainly interested in the amount they have to pay monthly. Why do banks or other financial institutions now charge a higher interest rate for a second-hand car? Mostly because they fear that the chance is greater that they will not or will only partially see their invested money. Either way, whether you are interested in buying a second-hand or a new car, in all cases it is worthwhile to carry out a comparison between the loans with various lenders.