3 Types of Credit for Buying a Car

A particularly significant investment, buying a car often requires taking out a loan. Among the most common financing options are the installment loan, leasing, and the assigned credit. Each of these three forms of loans has its own advantages and disadvantages. How to differentiate them? What criteria should be highlighted to make a wise choice?

Car purchase: a closer look at the assigned credit

Financial institutions often present the assigned credit among the solutions that can help you when purchasing your vehicle. As its name suggests, the assigned car credit is a specific loan intended for the acquisition of a vehicle. Its contract is precise, notably containing the cost of the car, the different installments, and the repayment period. It also informs you about the total cost of your credit, including the different rates applied and any additional fees. If you have opted for the assigned credit for the purchase of your car, the repayment only takes place after the delivery of your vehicle. This temporary commitment therefore leads to the cancellation of the credit if the delivery of the goods ultimately did not take place, regardless of the reasons. However, its major disadvantage lies in its rigidity. You cannot, in fact, change the purpose of the financing for the purchase of another item outside of what is provided for in the contract.

The installment loan intended for car purchase

The installment loan is the most common for buying a car. It allows you to have a new or used vehicle according to your needs. With this type of financing, you can know from the start the cost of your credit and the duration of your loan. Other advantages, the installment loan can be customized, meaning that the amount and duration of your installment can be tailored according to your profile. Its inflexibility is a significant drawback. You must, in fact, pay the same installment every month on a pre-defined date. There is a variant of this type of loan: the balloon contract. It has the advantage of reducing the installments for the first few years since the largest part of the capital is to be repaid at the end of the contract. The car also becomes your property upon subscription. Be careful, however, as poor management may keep you in debt longer, and you will also need to plan for the payment of the final sum as the end of the repayment period approaches.

Advantages and disadvantages of leasing

Leasing is also an interesting option for purchasing a new car. Commonly known as leasing or lease with purchase option, this credit allows you to rent a car from a rental company for a specified period and acquire it at the end of the contract after its purchase. Until the end of the contract, the rental company remains the owner of the vehicle, and you are considered a tenant. The advantage of leasing is the possibility of spreading the purchase over several installments, which can substantially lighten your expense. For a company, a car purchased through leasing does not enter its assets since it still belongs to the rental company. No surprises are likely to disrupt its budget since the installments are fixed until the end of the repayments. Far from perfect, leasing also has its disadvantages. The most common concerns the initial deposit required, which is sometimes quite high. Irreversible, leasing does not allow for retraction once the contract is signed.