“Why car loans are becoming more popular than leasing due to rising interest rates”

As the “Euribor” interest rate set by the European Central Bank has continued to rise steadily for almost a year, not only the monthly payments for housing loans, but also for car leasing have become more expensive.

As economists predict that the interest rate could continue to rise until the end of the summer, the monthly payments will also only get more expensive. Such a development encourages car buyers to evaluate alternative financing methods, among which car loans are becoming more and more popular.

Traditionally, when buying newer, more expensive cars, buyers have preferred car finance or operational leasing. Historically, it has attracted lower interest rates from the lender, and in the case of operational leasing, it is possible to adjust the monthly payment according to the hand, increasing or decreasing the residual value of the vehicle. It can be paid later by buying the car, or you can not pay and return the vehicle to the bank.

Taking into account that the widely used three- and six-month “Euribor” rates have already exceeded the 3% limit, the total rate of financial leasing determined by the bank is already equivalent to the car loan rate. In addition, the monthly payment is constantly increasing, and it is difficult for the buyer to predict what it will be in the summer, fall or a year from now. Therefore, the attention of buyers comes to the car loan, which has a fixed rate throughout the loan repayment period.

The data of “Bigbank” confirm that buyers in Latvia choose a car loan for the purchase of newer cars. If in the first quarter of last year the average loan amount for the purchase of a light vehicle was 6,846 euros, then this year in the same period it has increased to 7,963 euros. This means an increase of more than 16%. The number of car loans issued has also increased, and this confirms the observation that buyers are currently cautious about leasing.

The content of the publication or any part of it is protected by copyright within the meaning of the Copyright Law, and its use without the permission of the publisher is prohibited. Read more here.