The external financing of a new car is one of the most common forms of financing in Germany. Mostly, new car financing runs like most other financing. The purchase amount is made available as a loan. There are also interest and fees. The total amount will be repaid in monthly installments. The installments are paid until the debt is fully paid. Criticism at pnltc.org
However, new cars, and also used cars, are increasingly being financed with a loan with a final installment. This means that monthly installments are paid over an agreed period and the remaining amount is paid as the so-called final installment at the end of the term. Here, borrowers usually have three options for actually paying the required final installment.
On the one hand, the final installment can then be paid from existing equity. Many borrowers finance the upcoming final installment through so-called follow-up financing. Or else, they sell the car themselves and pay the final installment with the sales price received. Here, however, it must be clarified in advance whether the respective lender agrees to the advance sale, since in the case of car financing, the car often remains in the lender’s possession as security for the loan, also referred to as security until the debt is settled.
A new car loan with a final installment has many advantages. Compared to conventional financing models, the monthly rate is usually very low here, precisely because the final rate is at the end. This variant of car financing is particularly suitable for people who currently do not have their own funds for car financing, but who expect a larger sum in the foreseeable future, for example through life insurance or a savings contract.
They can then benefit from the lower monthly installments and ultimately finance the final installment from their own funds. This means greater financial leeway during the loan term. The final installment of the financing is determined when the contract is signed and when it will be due. This enables good transparency and good planning from the start. A certain level of security for the borrower.
More and more providers are offering a new car loan with a final installment. Whether car dealerships, local banks or online providers, the offer is large and varied. As large as the selection, the differences between the individual offers are also great. A comparison can provide a meaningful overview here and be a good help in finding a good and individually tailored offer.