Financing is generally used to purchase a vehicle. Very few consumers who buy a new or used car are “real” cash payers. There is hardly any other product with so many different financing options as for the car.
Car loan through car banks
On the German market are primarily the car banks, which belong to the manufacturing groups, the providers of particularly cheap financing models, such as three-way financing. In addition to the group’s own banks, other banks that finance the car loan regardless of brand have positioned themselves on the market and the third alternative for consumers is to take out an installment loan, which is then used to buy the vehicle in cash from the dealer.
Car loan as debt financing
The favorable conditions at the auto banks with which the dealers work do not really have to be the best form of financing for the consumer. For such a low-interest car loan, the dealer pays a contribution to the bank in the form of advertising costs, which limits his willingness to grant generous discounts during price negotiations. A customer who takes out a cash loan from a third-party bank for the car loan has a better chance of negotiating high discounts on the vehicle price. It is often better for the customer to be willing to accept higher interest rates on the car loan because the bottom line is that the high discount means that the costs are lower than with the low-interest loan from the dealer.
For car buyers with weaker creditworthiness, on the other hand, who would not necessarily get a loan in the order of magnitude requested from a bank, financing through the dealer can make sense, because the car banks are more generous when making decisions because they provide additional security during the vehicle registration withheld the term of the loan