For the purchase of a new or used car, cash purchases are becoming increasingly rare. There are different means of financing and, among them, the famous car loan offered by online banks and some neobanks.
Just like real estate loans, online banks and neobanks have taken up the subject of car loans by offering offers comparable to what can be found at most traditional banks. This is also an element taken into account by most car manufacturers who also offer their own financing services to the point that cash prices hardly evolve in a booming electric car market.
LOA, LLD, Auto Credit: What are the differences?
Rare are the customers who buy their new car cash. In the vast majority of cases, these cars are financed either by an LOA or by an LLD or a classic loan from a bank or directly from the manufacturer. In the latter case, it should also be noted that dealers are most often affiliated with a bank since they do not have a banking license. We then talk more about leasing than credit. It is also a way for manufacturers to ” hold » a customer with his brand over time.
Let’s take first the Lease with Option to Buy (LOA). This is the most popular financing formula, no doubt because it is similar to a more classic consumer loan allowing the vehicle to be purchased or not at the end of the contract. The advantage is that the resale price is fixed at the start of the contract, the consumer then makes a bet on the future odds of his vehicle and can come out a winner by buying the car at a lower price compared to the market. However, the exact opposite can also happen. The contribution is also more important than the other methods of financing and the maintenance as well as the insurance are not included in it. There may also be reconditioning costs depending on the condition of the vehicle.
Next comes the LLD (Long Term Rental). This is the most captive offer, and therefore the most profitable for manufacturers. On the other hand, it is not devoid of interest for the customer who does not wish to have to ensure himself the maintenance, the resale of his car and the additional services such as insurance or maintenance. The key characteristic of the LLD concerns the fact that the car is well leased throughout the duration of the contract, and does not belong to the customer who will have to return it at the end of the lease. Inevitably, the monthly payments are higher than with an LOA. This method of financing should not be seen as an investment, but more as a value in use, such as paying real estate rent to an owner. The advantage for the customer is that it will be possible for him to drive in a new vehicle regularly by changing model without having to pay part of the price of the car. Be careful though: the terms of these offers are often different depending on the manufacturers who may charge additional costs such as repairs or excess mileage.
Finally, the last option, the one that interests us here, is the car loan offered by banks. It could look like theleasing(or leasing), but it is above all a consumer credit. It is therefore up to the buyer to take the steps with a bank to obtain a loan corresponding to the price of the vehicle (new or used) and to ensure the monthly payments. The vehicle is then purchased in cash from the manufacturer. The buyer owns 100% of his vehicle and can resell it when he sees fit while ensuring the repayment of his loan. This is a fairly significant financial advantage compared to an LOA or an LDD, but it also implies that the additional costs are covered by the customer, namely maintenance or the registration certificate. Some manufacturers are also directly the junction between banks or credit organizations, just to have to deal with only one intermediary. On the other hand, it is advisable to spend time comparing the offers of online banks and neobanks offering this type of credit.
Which banks offer car loans?
Banks have integrated the purchase of a new or used vehicle into their credit-based products. In the case of these so-called creditsfor consumption“, it is important to take a good look at the “annual percentage rate of charge(TAEG), or the total cost of credit for the consumer. It is expressed as an annual percentage of the total amount of credit. We carried out a test on 4 banks with the same examples to compare offers and rates:
- A used vehicle at 7000 euros over 36 months
- A new vehicle at 35,000 euros over 60 months.
Hello Bank
Hello Bank allows you to take out a car loan of 5,000 to 75,000 euros over a period ranging from 4 to 72 months. For example, for a used car loan of 7,000 euros over 36 months, the APR is at 5.71% and monthly payments at 211.59 euros. For a new car loan of 35,000 euros over 60 months, the APR is at 4.9% and the monthly payments amount to 657.13 euros. You can perform your simulation directly from Hello bank website.
N26
The neobank works in collaboration with specialist credit partners. In France, it is Younited Credit. The N26 car loan makes it possible to finance a new or used vehicle, from 1,000 euros to 50,000 euros. Let’s take the example of a second-hand vehicle at 7,000 euros over 36 months, the APR is set at 4.59% and monthly payments at 148.73 euros. If we go for a new vehicle at 35,000 euros over 60 months, the fixed APR is still at 4.59% and the monthly payments amount to 652.51 euros. N26 also offers its own simulator on its site.
Boursorama Bank
The car loan at Boursorama Banque is intended for individuals wishing to acquire an electric or hybrid vehicle, or benefiting from an ecological bonus. Boursorama Banque offers APR varying according to the amount and the monthly payments with an amount of up to 50,000 euros over 72 months. Just like the classic car loan, no contribution is required to take out this loan. No application fees are charged by the bank, which is not necessarily the case with traditional banks. For example, with a second-hand vehicle at 7,000 euros over 36 months, the APR is at 5.17% with monthly payments of 210.35 euros. If you take a new vehicle at 35,000 euros to be reimbursed over 60 months, the APR is at 4.07% and the amount reimbursed per month is 645.73 euros, which is substantially the same as at Hello Bank. Here again, Boursorama offers its own simulator on its site.
Orange Bank
Car credit at Orange Bank is reserved for its customers, so you will have to be a customer of the bank to obtain it. However, it is possible to perform a simulation directly from the Orange Bank website without being connected. The site is also more precise than the competition, because it asks for more information on the nature of the vehicle (used, green, motorhome, 2 or 3 wheels, etc.). The duration of the loans varies from 12 to 86 months and the amount ranges from 1000 to 75,000 euros. If we take a second-hand vehicle at 7,000 euros over 36 months, the APR is 4.10% with 206.10 euros monthly payment. For a new vehicle of 35,000 euros over a period of 60 months, we obtain still an APR of 4.30% with 649.02 euros monthly payment.
Broadly speaking, these banks offer more or less the same rates and the same monthly payments for a few euros loan on our examples. Note that all these values are only for commercial proposal, the final result is given during the subscription process with the bank.
Other online banks or neobanks also offer this type of credit. Again, if the simulators are generally reliable, it is possible that the results will not be completely accurate given your situation and the demands of the bank. So remember to contact your bank before you start.
But then, what is the best deal for a car on credit?
With the recorded end of sales of new thermal cars approaching, due to the European Commission’s ban scheduled for 2035, investment on the car side will above all make sense on the electric car side and manufacturers have already largely followed suit concerning the various means of financing seen above.
In our columns, we have already proven that auto credit (depending on the banks) had an advantage over financing by an LLD and more by an LOA. Credit has above all this advantage of becoming the owner of your car from start to finish, and thus of being able to resell it as you see fit.
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