Auto loan, how much to borrow?

If you want to buy a new or used vehicle, it is now better to go through a car loan. Banks offer solutions tailored to your situation and put in place monthly payments that allow you to not pay your vehicle for cash.

But beyond the vehicle itself, be aware that auto credit may include other fees. What can he finance exactly?

The benefits of auto credit

The benefits of auto credit

Auto credit is the second most important credit after home loans. It is better to opt for a bank loan to finance the purchase of a vehicle, rather than paying it in cash, if your cash flow permits. Indeed, you can keep your savings and let it generate income.

Auto credit has several advantages:

  • You pay a fixed monthly payment for a defined period of time which allows you to forecast your budget
  • You do not start paying your monthly payments until you receive the vehicle, in the case of an assigned credit
  • You can normally repay your credit totally or partially without having to pay a penalty fee as it may be the case for a mortgage
  • You finance the full price of the vehicle and you can also integrate other costs inherent in the purchase of the same vehicle

So what can auto credit finance?

So what can auto credit finance?

Depending on your resources and your personal situation, the bank or credit institution will calculate your borrowing capacity, which is the maximum amount you can repay.

This calculation will also take into account the credit rate (specific to each bank) and the repayment term. The longer the credit period, the lower the amount of the monthly payments and vice versa.

Depending on the price of the vehicle and your borrowing capacity, it is highly conceivable and even recommended to include other costs related to this acquisition.

In addition to the purchase price of the vehicle, the car loan automatically includes the APR (Global Annual Effective Rate) which determines the total cost of the loan. It contains :

  • Bank interest
  • The various fees and commissions: registration or registration fees, bank fees, guarantee fees …
  • Insurance premiums if you buy insurance

Other expenses that you can finance through auto credits are those related to obtaining official documents and those related to the financing of accessories or maintenance of the vehicle.

Finance official documents

Official documents are simply gray card and insurance. Both are mandatory.

The vehicle’s registration certificate, or registration certificate, is its title of ownership which specifies all the details concerning it: model, registration, identity and domicile of the owner, date of first entry into circulation …

Whether for the purchase of a new vehicle or a used vehicle transfer, the gray card must be created or updated at the time of sale. This transaction is paid in the form of a tax for the benefit of the Treasury which varies according to:

  • Vehicle type: new or used
  • The department where the buyer is domiciled
  • The date of first entry into circulation
  • The CO2 emissions produced by the vehicle

Financing possible car equipment

You can fully include additional equipment or options for your vehicle in your car loan. Here is a non-exhaustive list :

  • Roof box
  • Radio car equipment
  • Towing equipment
  • Technical options: GPS, hands-free kit, reversing camera, DVD player …

If you find it useful to add options to the vehicle, it is when you take out the auto loan that you must do it if it does not increase your borrowing capacity.

Finance vehicle maintenance

The car loan can also take into account a budget for the maintenance of the vehicle (especially if it is the acquisition of a used car) or to deal with any repairs.

It is also wise to consider including in your car loan a warranty extension on the vehicle offered by the seller. You will benefit from an extension of the contractual auto warranty.

Are the conditions the same for a self-assigned credit as for a personal loan?

Are the conditions the same for a self-assigned credit as for a personal loan?

As part of an assigned car loan, the bank advances the funds to cover the purchase of a vehicle as well as any other charges mentioned above. The only constraint is that you must necessarily justify all these expenses. Indeed, the car loan must only fund the costs associated with the vehicle that it finances at the time of its acquisition.

Conversely, the personal loan is an amount that the bank pays you and that you are free to spend as you wish. You can buy your car and finance other related costs without having to justify anything. You are free to equip your vehicle as you want and whenever you want. This type of credit is obviously more expensive than the credit allocated.