Long Term Car Loan, LOA or Classic, What to choose?
All major vehicle brands have their own financial service, so that they can offer a varied range of credit. We have reviewed for you the proposals of auto credits of these major French and foreign brands.
We therefore found that the proposed financing was all very close, indeed the vast majority of them offers 3 types of financing: A credit quite classic, a LLD and a LOA (also called leasing).
Classic car credit:
This is the choice that the majority of French people make. When signing the contract for the purchase of the vehicle, the buyer determines with the seller his need for financing. (Amount of the purchase of the vehicle) – (possible personal contribution) – (value of the recovery of the old vehicle).
This sum is then repaid by monthly installments, deducted from the buyer’s current account.
- The vehicle is from the start the property of the buyer, the registration certificate (gray card is in his name).
- This is a simple solution, the principle of auto credit is the same as any consumer credit.
- The buyer is the owner, but the lender can take guarantees (called real or personal surety). The most common being the pledge. The lender pledges your vehicle to the prefecture, so you can not sell it until the credit is settled or refunded in advance. This prevents malicious people from buying a vehicle on credit to resell it immediately while keeping the money.
- At first, the vehicle depreciates faster than you repay the credit. (Clearly: If you resell it after a few months, the amount of the sale will not cover the prepayment of the credit).
The Lease with Purchase Option (LOA):
Also called leasing. It’s a special kind of financing. The customer does not own the car, he is not really a tenant either. In fact it is the lender (bank or credit company) who acquires the car.
- At first, the customer pays rent, he is user of the vehicle as of right.
- Secondly, when the contract expires, the customer can become the owner of the car, for which he will have to pay a sum of money (often called last rent) to the credit company. ( This sum was determined at the signing of the contract). But he can also decide to return the vehicle to the dealer.
Benefits of the LOA:
- You do not commit to a purchase from the outset, you decide that at the end of the contract.
- If you decide to return the car, the dealer takes it back. Moreover if you leave on a Rental with Purchase Option, you have no delay in restitution of the old car and taking possession of the new.
Disadvantages of the LOA:
- During the period of payment of rents, the registration document is not in the name of the client but that of the financial company, however his name appears as a tenant. You should know that in most cases it is the customer who will pay the vehicle registration fee. (gray card fee).
- This is not systematic, but very often, the customer will have to pay a sum of money called “deposit”. This sum is returned at the end of the contract with possible deduction of the costs of reinstatement and the exceeding of the mileage.
Our advice and advice on the LOA:
- This is not the preferred financing of the French. These being attached to the notion of property have indeed long shunned the rental with option to buy, but in recent years it has its followers.
- However, we must recognize some advantages, the main thing is to always ride in a new or very recent vehicle.
- If you choose this type of credit, read the contract well, indeed multiple options are possible. You will have to determine from the beginning how many kilometers you will make per year. The more kilometers you will declare and the more expensive the rents will be, but be careful not to underestimate the distances traveled because if you exceed the fixed limit, a fixed rate calculated with respect to the distance covered in excess will be applied to you. (It will be deducted from the deposit).
Long Term Rental (LLD):
Unlike Rental with option to buy, long term rental is really a vehicle rental. It has long been used by companies who see it as a management comfort, as well as financial and accounting benefits.
The customer is therefore the tenant of the vehicle for a planned duration and specified in the LLD contract (generally between one and five years). The amount of rent depends on the new value of the car, the number of annual kilometers you have made and the options you have chosen.
Benefits of the LLD:
- The main interest is peace of mind. Indeed the insurance of the automobile is included, in the rents, as well as the maintenance of the vehicle.
- The cost of use of the vehicle is smoothed throughout the year. No need to plan for a cash outage when the car needs to be overhauled at the garage or when the annual due date of the insurance arrives.
Disadvantage of the LLD:
- A higher monthly cost than a rental option.
Our advice and advice on the LLD:
- The monthly cost of rent can be perceived as very high. However, we must take into account the fact that the only requirement related to the use of a vehicle in LLD (caricaturing a little) is the filling of the tank!
- To find out if the formula is interesting, just compare the discount of the vehicle, the insurance and maintenance fees throughout the duration of the lease.