How to Save Thousands on Car Financing: Two Tricks You Need to Know

Anyone who finances a car is currently paying a lot of money for interest due to an average interest rate of 8.24 percent.

• new car: With financing via an installment loan with a term of seven years, the interest costs amount to around one third of the purchase price: For a new car at the current average purchase price of 42,790 euros, interest of 13,133 euros is due.
• used cars: Because of the lower purchase price, the loan for the used vehicle can be repaid more quickly. With a term of six years and a current average purchase price of 18,800 euros, the interest payments add up to 4896 euros – around a quarter of the purchase price.

Two tricks help to significantly reduce these immense additional costs.

Tip 1: Comparing offers saves over 3500 euros in interest costs for a new car

If you compare several offers before completing the loan, you usually get the loan much cheaper. Half of all Verivox customers take out an installment loan with free use at an interest rate of 6.09 percent or less.

• When buying a new car, buyers save 3541 euros thanks to the lower interest rate.
• When used, the financing costs drop by 1310 euros.

Tip 2: On average, car loans are 14 percent cheaper than free use loans

According to data from the banking association, 58 percent of all installment loans are used to buy a car. However, many people interested in credit refrain from specifying this purpose when making their financing request. According to the Verivox evaluation, an expensive mistake:

• The average interest rate for all car loans taken out via Verivox is 5.24 percent. This saves another 1380 euros on financing a new car and 512 euros on a used one.
• Compared to financing at the nationwide average interest rate, new car buyers save a total of 4920 euros with a car loan and interest rate comparison, used car buyers 1822 euros.

Pay for tires with a car loan too

If you want to make even more use of the better conditions of a car loan, you can also use it to finance additional products such as attachments. “For most banks, it is sufficient if around 75 to 80 percent of the loan amount is used to buy the vehicle,” says Verivox Managing Director Oliver Maier. “In this way, car buyers remain flexible and can also use their loan to finance a set of tires, a roof rack or even completely different expenses, for example.”

The only disadvantage of credit financing: During the credit period, the vehicle should be covered by fully comprehensive insurance. “In the event of an accident that is your fault, it replaces the value of the vehicle so that borrowers can redeem their old loan before they buy a new car,” says Maier.