One desire, a car is taken on credit, is not enough. It is also not enough that you have a high income and you work in a promising company.
In some cases, this does not help to satisfy the bank's interest in you as a potential car loan borrower.
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Also, these loans often have their own disadvantages and advantages, which should be studied even before you start choosing a particular bank or auto loan program.
The concept of the subject
Car lending is a type of lending money by a bank, in which the borrower has the opportunity to purchase a used or new car for cash or non-cash funds with the security of this particular car that is being bought, or other liquid collateral.
The price of a loan is the amount of money that you have to pay for the interest accrued on the annual calculation of rates for using the money borrowed from the bank.
The “body” of the loan is directly the amount of money that you need in order to fully pay off the cost of the car that you have chosen for yourself.
Car loan collateral is guarantees that are provided by the client to the bank as collateral and guarantee of co-borrowers, so that the financier understands that payment under the loan agreement in the future will be made on time and in due volume.
Sometimes only one collateral or one guarantor can act as collateral for such a loan. And sometimes you need to use both options.
Such conditions for granting a car loan may be dictated by an insufficient level of income of the client, or too large a loan amount or short terms for repaying debt in the future.
General characteristics should be noted, as an opportunity for the client to receive a car on borrowed funds:
- A car that is used as collateral for a loan cannot be sold, exchanged or donated by the borrower. It can only be used or rented out.
- The certificate of vehicle registration and title will be kept in the bank until you fully repay the borrowed funds.
- The borrower undertakes to pay in installments the debts to the bank. According to the terms of the contract and the established payment schedule.
- In the event that delays occur, the bank will have the right to charge a percentage of the penalty for each day of delay on the amount of debt, plus it may add fines and penalties, so it is better not to delay payments.
- If the borrower has extensive driving experience, he will not require CASCO insurance, but the driver will need to buy a mandatory motor third party liability insurance policy.
- In the event that long-term debts may form, some banks may allow you to refinance the loan - for example, reduce the amount of the monthly payment by increasing the loan term.
There is a fairly large number of car loans, which allows a potential borrower to choose the right one, suitable for its capabilities and parameters agreed with the conditions of the bank.
These are also express loans, which are considered very quickly and are issued, but with high interest rates and for a short period of time. These are also long-term loans (no more than 7-10 years) for car loans, where interest can be reduced, but the overpayment will be more than with classic lending.
A classic car loan is a certain limit of money that the bank sets out to the client, depending on its capabilities, as well as certain rates, which average no more than 22-24%.
This is if you do not insure an additional type of protection for an auto loan, do not provide guarantees and do not pay a down payment.
Reasons for car loans
Noting the advantages of car loans, I would like to say that there are a sufficient number of them, but they can be subjective in some respects.
For whom, for example, it is profitable to take a car on credit, concluding an agreement with a bank for a maximum of 5 years, but not for someone. Someone wants to choose a car himself in the car dealership that he liked, and the bank imposes its car dealership, with whom he has formed a partnership.
Someone is interested in additional CASCO insurance because the driver is not experienced in this area, but it’s not profitable for someone - because it’s too expensive for the money.
The advantages of car loans can be summarized in one small list of features and positive aspects:
- The borrower can use the car immediately after signing the contract with the bank.
- The choice of car models is quite large.
- Some banks have specialized programs where cars of a particular brand are sold on credit.
- The client can choose the loan program with the most favorable conditions.
- The standard term for using borrowed funds for car loans is from 12 months to 5 years.
- It is possible to pay the down payment under the state program - with the provision of a subsidy from the state budget, which covers part of the down payment, or interest on the loan.
- You can not pay the first installment or not provide a certificate of income if you are a salary client (the holder of a plastic card where your salary is transferred), with an open salary account in the same bank where the application is submitted.
- After purchasing an expensive car, the client can apply for a personal income tax refund through the tax office.
- Express lending allows you to issue a car on loan funds in record time quickly.
- Once you have raised enough funds to roughly cover your down payment, you can apply for a car loan. You do not need to collect the full amount to buy a car.
- There are preferential rates for permanent, corporate, as well as payroll clients.
- Payment of the initial payment in the amount of up to 40% significantly reduces the loan rates (by 3-4%).
- Some banks offer to cover the down payment with the proceeds from the sale of the old car. This is very convenient for those customers who already own a car, which they could not sell for a long time. Here the bank will help them in the sale, and even give the go-ahead for a loan for a brand new car.
The biggest and most important advantage with this type of lending is the fact that you do not have to wait until you save enough money to pay for the cost of the car.
There are programs where you can even get a car on a loan using one or two documents. True, you will need something to cover the missing guarantees.
This is usually done through the provision of multiple guarantees, secondary collateral, a liquid total loan amount, and additional types of insurance - for example, personal insurance (life, health).
In general, if someone urgently needs a car, he may well consider car loans as an opportunity to buy it in a short time.
Flaws
Banking programs are not always as transparent as it might seem at first glance. It can be difficult for an ignorant beginner in the field of lending to figure out where the pitfalls are and how to get around them.
The most frequent moments that confuse potential borrowers are the hidden commissions of the bank. They usually bring the loan amount to a value that does not match the one specified in the contract.
Therefore, you should clearly discuss this point with a bank employee even before signing the loan agreement.
The obvious disadvantages of a car loan include the following points:
- You can’t just sell a car without the knowledge of the bank, donate it to someone, or exchange it for another version of the car.
- After a sale and purchase transaction with a car dealership, the car is first registered with the owner of the borrower, then it is registered as a pledge to the bank, and only after the full repayment of all debts by the borrower, it will become his right of ownership through re-registration with the traffic police.
- You can choose your car model only in those salons recommended by the bank.
- In the case of purchasing a used car, an expert appraiser of this property connects only the one recommended by the bank.
- The procedure itself can take quite a long time - from several days to several weeks. It's connected with:
- purchase through a car dealership;
- registration with the traffic police;
- insurance;
- and, perhaps, even with the passage of an additional technical inspection, if the car is not new.
- Using a state subsidy, you can only buy cars on credit that were produced by domestic factories, or foreign ones, but assembled constructively in Russia.
- If the applicant is younger than 21-22 years old, then he may not be allowed to take a loan for a car.
- If the client will be 60-65 years old at the time the loan agreement expires (in different banks - in different ways), then such an applicant may be refused.
- In the event that there are long-term debts on the part of the borrower, or frequent delays in payments, the bank will have the right to take the car for itself, and you will only pay meager compensation.
- Insurance is not always returned to the client after the successful completion of the insurance period, without the discovery of insured events.
- By purchasing CASCO, the total loan amount increases by 10%.
- If it is not possible for the client to make an initial payment, then the annual interest rate will increase by 2-3 units.
- If you have been working at your last job for less than 3-6 months, you may be denied a loan.
- Very often, the bank does not issue all 100% of the cost of the car, but can only issue a maximum of 80-85%. But this is how it is written in advertising posters and materials, in practice, the maximum amount that the bank will lend is 75-70% of the cost of the car.
In addition to these main disadvantages, there is another detail that is found not in favor of car loans. This is the inability to buy CASCO insurance in installments.
Now, of course, banks are doing their best to make concessions to customers, offering installment plans for voluntary insurance in their products, and scatter the amount of insurance premiums over monthly loan payments.
However, not all lenders take this step. Therefore, before signing the loan agreement, also discuss this point with the bank manager.
How to make a decision
In order to make the most constructive decision that would not be a blow to your wallet or family budget when applying for a car loan, you must first carefully study all the conditions of the program that you like.
Those borrowers who have already received everything thought over in advance, calculated and double-checked together with a bank specialist. Anyone who wants to take such a loan as profitably as possible should do the same.
Experts, when choosing a particular banking product for an auto loan, suggest potential borrowers to pay attention to the following recommendations on how to make the right choice:
- First, decide on the bank which is the most convenient for you.
- Then look into the bank's programs that allow you to borrow money from them to buy a car.
- If the bank did not find a targeted car loan program, then take a closer look at consumer non-purpose loans.
- Compare your income level, the desired loan terms, the amount of the initial payment, as well as the rates that are charged on the loan.
- As soon as you find that you are not sure that you will be consistently paid a salary that will be suitable for a car loan, or there is a risk of losing your job, it is better not to take a loan at all.
- If you do not work officially, then you may be allowed to take out a loan only if you provide an initial payment of at least 30%, as well as several guarantors.
- Do not rush to agree to additional types of insurance. The maximum you can agree on CASCO. But if you pay the first installment, provide a guarantor and collateral, you have sufficient income, then you may well refuse life and health insurance.
If we compare a car loan with non-purpose consumer loans, it turns out that the latter option is simpler in terms of registration than the first.
In addition, the requirements for directed loans have always been higher than for non-purposed options. With a consumer loan for any purpose, there is no need to insure a car under CASCO - and this is already saving 10% of the cost of the entire loan.
Also, you do not need to spend extra money on paying an expert appraiser. The car does not need to be pledged to the bank. Therefore, against the background of a consumer loan, a car loan looks, to put it mildly, a very unprofitable enterprise.
It is most convenient to pay for a car loan by transferring amounts from a salary card to a bank account. But this applies only to those customers who have such a privilege.
You can still transfer funds via the Internet using payment systems, but they charge fees for transactions from 1 to 2-3%, depending on the conditions of the payment service.
The same applies to ATMs owned by "foreign" banks - commissions may also be charged.
If you want to pay by postal transfer, then know that the minimum for a transfer to a bank account is 5,000 rubles. you will be charged 75-84 rubles for mail services. This is according to postal statistics compiled as of November 1, 2019.
Therefore, such services can be used if there are no other means already very close. You can also transfer money from account to account.
If these operations are carried out within this bank, then it is completely possible to do without paying any commissions.
A car loan is an excellent opportunity for a fairly quick purchase - a vehicle, for those who need a car very quickly and who have savings to pay the down payment.
An article on car loans and consumer loans - advantages and disadvantages, which type of lending is more profitable in which cases. At the end of the article - video tips on buying a car on credit.
The content of the article:
Everyone, or at least a lot of people, wants to own a car. This desire is spurred on by the neighbor's purchase of a brand new foreign car. Seeing this makes me want to go to a car dealership. But without money there is nothing to do there. Where can you get them? This is where the idea of a loan comes to mind.
Of course, there is another option - to save money and fulfill your dream. But sometimes it is very difficult to save a large amount, and you want to buy a coveted car as soon as possible.
If there is already a car in your garage, then there is always a reason to worry about acquiring a new status foreign car. The way out of this situation again lies in the plane of obtaining a loan. Now there are many loan offers on the market, here we will talk about car loans and consumer loans. Which one to choose?
What is the difference
So, we have 2 options for a cash loan:
- car loan;
- consumer credit.
But if a consumer loan is issued, then with the money received you can buy not only an “iron horse”, but also a washing machine, and a TV, and everything that your heart desires.
We have decided on the appointment, now it's time to decide on the concept:
- car loan is a cash loan issued to citizens for the purchase of a car. There is one very important feature here - the purchased car will be pledged to the creditor until the debtor is fully settled.
- consumer credit means the issuance of funds for the purchase of any useful thing in the household. With this money you can buy the same car. In this case, the purchase will not have to be pledged to the bank.
In order not to make a mistake and make a worthy choice, you need to be aware of the pros and cons of these types of loans. Only by analyzing the situation, you can choose the ideal option. That is what we are going to do now.
Car loan - advantages and disadvantages
This loan product is very popular today. But to get a car loan, you need to have initial capital. Depending on the conditions of various banking organizations, you will have to initially pay up to 30% of the total amount.
Do not forget about the need to have funds for insurance - it will cost you about another 10%.
Almost all car loan programs involve car insurance. This should not be surprising, because in this case the car becomes a guarantor of the payment of borrowed money. The vehicle will be pledged to the credit institution until the debtor is fully settled. By the way, he (the debtor) will not be able to sell his car without the consent of the bank until the debt is paid in full. The car can not only be sold, but also changed or donated.
Given all the pros and cons of loan products, it will be easier to make a choice. When concluding a car loan agreement, it must be borne in mind that a car should only be bought at a car dealership.
In addition, the following requirements are imposed on a car with a car loan:
- the loaned car must be “under” 5 years old;
- acceptable technical condition;
- body geometry must be in accordance with the norm;
- import of foreign cars into the country must be carried out without violating the legislation of our country;
- the steering wheel must be on the left.
pros
- Interest on a car loan is several times lower than on a consumer loan.
- You can get a car very quickly - often on the day of signing the loan agreement.
- In this case, no types of security will be required, since the purchased car will be the guarantor of the loan repayment.
- You can participate in the trade-in program. It allows you to exchange an old car for a new one with a corresponding surcharge. In some cases, banking organizations provide additional bonuses in the form of interest reduction.
- Many banks are quite tolerant of customers who have used car loans and are loyal to delays.
- This program provides various benefits. Discounts can be up to 10%. Part of the losses of banking organizations is borne by the state.
- Car dealers make significant discounts to buyers who purchase a car with a car loan.
- There are a lot of car loan programs, and car dealerships, as a rule, provide a choice.
- But the main plus is the speed with which you can buy a car. Everything happens without unnecessary running around and standing in lines.
Minuses
- You have to make an initial deposit. It will not work without it, since almost all banking organizations require a certain amount to be deposited initially.
- Your car will be pledged to a credit institution until the amount of the debt is paid in full. If the debtor does not make payments, then the bank has the right, by a court decision, to take the car for debts.
- The car must be insured in CASCO. But the cost of this insurance is quite significant, they can reach up to 10% of the cost of the vehicle. And if the car you buy is expensive, then the amount of the overpayment will be quite significant. Car dealerships may offer a loan for insurance, but the interest on this loan will be much higher than the interest rate on car loans.
- Sometimes you can only buy a specific car model with a car loan. And it’s not at all a fact that the car you would like to buy will be on this list.
- It is unprofitable to extinguish this type of lending ahead of schedule. The fact is that banks in this case provide for a certain commission.
Consumer credit - pros and cons
Such loans are issued by banks and other financial institutions for the purchase of a variety of goods. Usually the issued amount does not exceed 1 million rubles. Such a loan can be issued for the purchase of a certain thing, in which case it becomes a target. But non-target loans are also practiced - using them, the debtor, when drawing up documents, is not required to indicate for what purposes he needs funds.
Such types of loans are issued to employed citizens over 18 years of age who have worked at their last place of employment for at least six months.
Here are the documents that will be required when applying for a consumer loan:
- a copy of the work book;
- passport;
- 2-personal income tax;
- military ID.
Advantages of a consumer loan
- The consumer has the right to buy any car - it can be brand new or used.
- You can buy a car from a private trader, and in this case, trade is appropriate, and you can buy a car cheaper.
- The cost of buying a car is significantly reduced, since there is no need to take out insurance.
- The car will not be pledged to the lender. You can dispose of the vehicle at your own discretion - the bank will not take it away from you.
- The car can be sold or donated.
- There are no fees for early repayment of the loan. This means that you will be able to repay the loan ahead of schedule, if such an opportunity arises, and you will not incur additional expenses.
Flaws
- Interest rates on car loans are higher. The overpayment can be quite significant.
- Cars are expensive, so it takes a lot of money to buy them. However, our banks are in no hurry to provide significant amounts of consumer lending. There is also a high chance of getting rejected. The risk group includes citizens with low wages and those who have made delays in payments in the past.
- The big disadvantage is the need for guarantors. Of course, you can do without collateral, but the interest in this case will be higher.
- Getting a consumer loan is quite difficult - it will take a lot of time to process it.
What type of loan is more profitable
It is impossible to answer this question unequivocally - in some cases, a car loan may be more profitable, in others it is preferable to take a consumer loan.
Consider several situations and discuss some of the nuances.
- Suppose you have collected almost all the money you need to buy your dream, and you are missing a small amount. In this case, it is preferable to take a consumer loan, because you really do not want to give the car as a pledge to the bank, when almost all the money has been collected for its purchase. If you don't have enough money, it is better to use a car loan.
- If you feel that your financial situation is unstable and you may lose your job at any moment, it is also better to get a personal loan. In this case, you can easily sell the car, which cannot be done when choosing a car loan, when the bank will sell the car. As a rule, banks sell cars at a price well below the market price.
- If you do not expect to own a car for a long time, and you think that you will sell it before paying off the loan, it is wiser to take a consumer loan, because with a car loan, the car remains pledged to the lender.
- If you qualify for the state car loan program, it is better to take a car loan. This way you will get a very good discount. In addition, you can count on the repayment of part of your debt by the state.
- If your financial situation is stable, if you have chosen an expensive car, then take a car loan. Statistics say that the owners of expensive cars still draw up CASCO.
Video tips on buying a car on credit:
So, we buy Toyota Auris in the Eleganse configuration (engine 1.4, manual gearbox). According to the price list, the hatchback costs 531 thousand rubles.
For the purity of the experiment, we should immediately stipulate some rules of our "game". One of them concerns the initial payment. There are loan programs that allow you to buy a car without a down payment, but as a rule, in this case, you pay an increased interest rate on the loan (usually 2-3% more). So from the point of view of savings (and sharing of responsibility), the newly minted car owner should still participate in the purchase with his own savings. A client without money is initially perceived by the bank as more risky.
The second rule concerns Casco. When buying on credit, the bank requires that the car be insured against theft and any damage. Insurance for the first year can be included in the total loan amount. But for simplicity of calculations, we will assume that the client will pay for the car hull with his own money, and not with credit money.
And the third thing we will leave out of brackets is a one-time commission for opening an account. The numbers are different everywhere, but compared to the total amount of the loan, these are mere pennies. For example, in Alfa-Bank, a one-time commission is 6 thousand rubles. In other banks, it is either a little more or a little less.
So, let's compare what the actual loans provided by Alfa-Bank, IBRD and UralsibYugbank for a period of one year will cost us.
Alfa-Bank issued 430,800 rubles (80% of the cost of the car) at 11% per annum. Monthly payment - 38,100 rubles. And for the year the client will overpay 26,400 rubles compared to the price indicated in the price list.
IBRD gives an annual loan at 12.5%. Monthly payment - 37,843 rubles, overpayment - 29,408 rubles.
Uralsib-Yugbank has the most expensive loan - 13% per annum. The monthly payment is 37,942 rubles, and the overpayment amount is 30,367 rubles.
Option two - everything is the same, but we were given a loan for three years.
In Alfa-Bank, the rate slightly increased - 11.3% per annum. The monthly payment is 14,200 rubles, and we will overpay for the same Auris already 84 thousand rubles. However!..
At the IBRD and with a three-year loan, the interest rate remained the same - 12.5%. Monthly payment - 14,212 rubles. The total amount of the overpayment is 87 thousand rubles. At the current exchange rate, almost 3500 dollars!
Finally, Uralsib-Yugbank issues a three-year loan at the same 13% per annum as an annual one. The amount of the monthly payment is 14,313 rubles, you will have to overpay 89,591 rubles.
And our last experiment is a loan for five years.
In Alfa-Bank, the rate increased again, but not by much - up to 11.5% per annum. The monthly payment will be 9500 rubles. The total amount of the overpayment for the car is 139,200 rubles.
The Moscow Bank for Reconstruction and Development provides a loan at 13% per annum. The monthly payment for these five years will be 9666 rubles. The total amount of the overpayment for the car is 155,452 rubles.
Uralsib-Yugbank will also issue a car loan at the same percentage. The monthly payment is almost equal to that of the IBRD, the amount of the overpayment is slightly more modest - 153 thousand rubles.
Let's summarize. The shorter the term, the greater the monthly payments, but the lower the total amount of the overpayment. And vice versa, a "long" loan makes regular payments almost invisible to the family budget, but seriously increases the cost of the purchase (with a 5-year loan by almost a third!). Of course, the larger the initial payment, the lower the monthly payments on the loan and the total amount of overpayments.
As credit consultants suggest, the most profitable loans for the buyer are those issued as part of special promotions. They, as a rule, are initiated by the automaker itself, which subsidizes the sale of cars to the dealer at a discount. Usually such discounts are associated with the appearance of a new model, while the previous generation turned out to be unsold. Or with the desire of the manufacturer to increase sales of a particular car.
Finally, the last question, a fundamental one: does it make sense to buy a car on credit? Car - yes!
The country has entered a period when almost everything is getting cheaper, except for food, housing and communal services and essential goods. With cars, the situation is different: both ours and foreign cars are constantly growing in price. According to experts' forecasts, the rush demand for cars in Russia will continue for at least another five years.
I'm ready to bet - in April 2008 you will not find Toyota Auris 1.4 in showrooms at the price indicated at the beginning of the article: 531 thousand rubles. The car will become more expensive.
It is also obvious that each next generation of the car is slightly larger, more powerful, more comfortable, but also more expensive than the previous one. Therefore, buying a car on credit today, you get (or almost get) into its future value. So hurry up, but with a calculator in hand!
47% of Russian families have a car. According to a VTsIOM survey, this figure has grown by 10% over eight years. In 2006, only 37% of respondents had a car in their family.
According to the Automakers Committee of the Association of European Businesses (AEB), almost three million new cars were sold in Russia in 2013. In 2014, sales decreased by 8%, but there is still demand.
Plans for the purchase of a four-wheeled "iron horse" are most often made by students (23%) and housewives (25%). No wonder that every second new car in Russia is purchased on credit.
The popularity of car loans is explained by the fact that it is difficult to save up and buy a car for cash. But there is another financial instrument that makes the dream of a car come true. This is leasing.
Car leasing is a popular way of purchasing a car in the USA and Europe. There, up to 30% of cars bought by private individuals are leased. In Russia, this figure is negligible. Why?
Let's analyze the mechanisms of car loans and car leasing, weigh their pros and cons and try to understand what is still more profitable.
car loan
A car loan is an interest-bearing loan issued by a bank or other credit institution to an individual for the purchase of a car.
This is a popular type of consumer lending. Peculiarities:
- This is a targeted loan: money can only be spent on buying a car.
- This is a secured loan: the car remains pledged to the bank until the loan is repaid.
Legal regulation of car loans is carried out by the Civil Code (Chapter 42), the Law "On Banks and Banking Activity" (dated December 2, 1990), the Law "On Consumer Credit (Loan)" (dated December 21, 2013) and other regulatory acts.
Types of car loans
There are various loan programs for buying a car:
- "Classic" (More details below);
- Express loan: simplified procedure, but high interest rates;
- Loan with buyback (BuyBack): a part of the loan is “frozen” and paid at the end of the term of the contract either by the borrower or by the car dealer, provided that the proceeds are credited for the purchase of a new car;
- Trade-in: exchange of an old car for a new one with a surcharge. The cost of a used car is offset by the cost of a new one;
- Factoring (interest-free loan): 50% of the cost of the car is paid, the rest is paid in installments;
- Loan with no down payment: when lending from a car dealer, the absence of a down payment can be a bonus.
In addition, we can talk about loans for used cars and loans without insurance as separate areas.
Car loan mechanism
Most often they resort to classic car loans. Let's take a look at his diagram.
You want to buy a car. There is no money for a new "iron friend". You go to a bank or a mortgage broker.
A loan broker is a commercial organization that acts as an intermediary between a borrower and a lender (a bank or a car dealer). Assists in the approval and processing of a car loan.
Car dealers can also act as lenders. They provide loans from their own funds or cooperate with banks.
You choose a bank (or a car dealer), study the terms of credit. Having decided, fill out the questionnaire and collect documents. The bank must make sure that you can repay the loan (solvency) and that you have no other debts (credit history). For several days, the bank thinks whether to issue a loan or not.
If the decision is positive, the bank and the borrower (now you) enter into an agreement. It specifies the term, interest, down payment, rights, obligations and responsibilities of the parties.
All the hassle of car registration falls on your shoulders. Also, most often the loan agreement provides for insurance at the expense of the borrower. And not only OSAGO, but also CASCO.
You are a happy car enthusiast! The main thing is to carefully repay the debt and do not forget that although you are the owner, the car is pledged to the bank. You not entitled to sell, give away or exchange. And if hard times come and there is nothing to pay on the loan, the bank (car dealer) will take your "swallow".
Pros and cons of a car loan
A car loan, as a financial instrument, has its advantages and disadvantages.
- You can have a car without capital. Only a few can buy a car for cash, but saving for a long time and not always works.
- Big choice. You can buy what you like, not what you have enough money for.
- A variety of lending programs: you can choose the most profitable for yourself (with a minimum period or, for example, without a long registration).
- Complicated procedure. Strict requirements for the borrower.
- Increase in the cost of a car. You will have to pay interest + compulsory insurance.
- Car deposit.
Car leasing
The word leasing comes from the English lease - "rent". But in Russian law, leasing is not identical to rent. We have it view lease relations. In them, one party (the lessor) invests money in the purchase of property, and the other (the lessee) accepts this financial service and uses the purchased property.
Leasing legal relations are regulated by the Civil Code (Chapter 34), as well as by the Federal Law “On Financial Lease (Leasing)” dated October 29, 1998.
The subject of leasing can be any non-consumable things (except land), including vehicles.
Autoleasing mechanism
Car leasing is the purchase and transfer of cars for temporary possession and use for a fee on the basis of an agreement between the lessor and the lessee.
The general scheme is as follows.
you want a car. There is no money to buy. You apply to a leasing company. You tell them what kind of car you would like to have and show some papers.
Unlike a loan, the package of documents is minimal. As a rule, this is a statement, a passport and a driver's license. From a procedural point of view, leasing is much simpler than lending.
An agreement is concluded between you and the leasing company. From now on, you are the lessee.
Currently, the lessee can be both legal entities and individuals - NOT entrepreneurs.
Until 2010, the Law "On Leasing" contained a clause according to which the leased asset could only be used for commercial purposes. In leasing, they took mainly buses, trucks and agricultural machinery. There was practically no financial lease of passenger vehicles.
But now there are leasing programs for citizens, according to which they can get any car for use. Currently, only three companies are engaged in leasing for individuals in Russia.
After the conclusion of the contract, the lessor buys a “dream car” for you and transfers it to you for use.
Keyword - use. The owner of the car is the lessor. In this regard, it is he who is engaged in registering the car, passing technical inspections and other chores.
It should be noted that all additional expenses incurred by the lessor (insurance, taxes, etc.) are ultimately paid by the lessee, as they are included in the lease payments.
Leasing payments are usually less than loan payments. The fact is that they are calculated minus the so-called residual value.
Residual value is the redemption payment for the car, which the lessee must pay at the end of the lease term in order to get the car into ownership.
Also, the amount of payments is affected by the presence / absence of an advance payment and its size. In other words, the more you pay at the beginning and at the end, the less you have to pay monthly.
During the leasing period (from one to five years) you are a happy car enthusiast. The main thing is not to forget to make monthly lease payments and remember that at the end of the contract you will either have to buy the car or return it.
Types of car leasing
There are two auto leasing schemes:
Pros and cons of car leasing
Car leasing saves you a lot of hassle. For example, you do not need to waste time searching for a seller and car registration. And this is not the only advantage.
- More flexible payment schedule. As a rule, they are lower than loan installments.
- Simplified procedure for collecting documents and concluding an agreement.
- The ability to update the car every few years.
- The car is owned by a leasing company. At the slightest problem with payments, as well as financial difficulties of the lessor himself, it can be withdrawn.
- The vehicle user cannot sublease it.
- Individuals do not have tax preferences for car leasing.
Automotive arithmetic
Knowing the mechanisms of car loans and car leasing, the main question still remains: “Which is more profitable?”.
To answer it, we asked Leasing Trade to compare the costs of leasing for individuals and a car loan under equal conditions. Here's what happened.
“Property was chosen - a 2014 Toyota Corolla car, the cost is 690,000 rubles (sedan; engine power - 1.6; 122 hp).
We took standard car loan calculations: the loan amount is 690,000 rubles, an advance payment of 20% or 193,800 rubles, a period of 36 months. We took the calculation of a car loan from one well-known bank (let's call it X) as a basis. The interest rate on its lending program with a standard set of documents is 15% per annum. The calculation was made without taking into account financial protection programs, OSAGO, CASCO and additional expenses.
The calculation of leasing for individuals is based on the offer of one of the leasing companies (let's call it Y). The monthly payment did not include OSAGO, CASCO, as well as mandatory and related payments (transport tax, vehicle registration with the traffic police, annual maintenance, etc.).
Car maintenance costs will be approximately equal in both cases, are mandatory and calculated separately.
CASCO and OSAGO insurance was made based on the following parameters:
- OSAGO: 5,500 rubles; region - Kazan; driver's age - over 22 years; driving experience - more than 3 years; car power - 122 hp One driver is allowed to drive.
- CASCO: 86,000 rubles; place of registration of the vehicle - Kazan; information about an individual: male, 30 years old, marital status - married, one child; driving experience - more than 6 years, accident-free driving. One driver is allowed to drive.
| car loan | Car leasing | |
| car cost | RUB 690,000 | RUB 690,000 |
| Interest rate | 15% | |
| Term (in months) | 36 | 36 |
| Initial payment 20% | RUB 138,000 | RUB 138,000 |
| Payment type | uniform | uniform |
| Monthly payment | RUB 19,135 | RUB 11,790 |
| Interest overpayment | 135 000 rub. | no, as the car is being returned |
| The total amount of payments = the amount of payments under the agreement (credit / leasing) + advance payment | 688,860 + 138,000 = 826,000 rubles | 424,440 + 138,000 = 562,440 rubles |
| Security deposit | 0 | 0 |
| CASCO insurance | RUB 86,000 | RUB 86,000 |
| OSAGO | 5 500 rub. | 5 500 rub. |
| Registration of the vehicle in the traffic police | 2 000 rub. | 2 000 rub. |
| Transport tax | 4 270 rub. | 4 270 rub. |
| Minimum income to buy | 31 900 rub. | 31 900 rub. |
| Market value of the car at the end of payments | RUB 539,000 | 0 |
| Advance redemption payment | absent | RUB 441,000 |
| The cost of buying a car | RUB 826,000 | 562,440 + 441,000 = 1,033,440 rubles |
»
Thus, if we consider the option in which leasing does not provide for the transfer of the car into the ownership of the client, then the monthly payment under the leasing agreement will be lower by 7,345 rubles (that is, by 38%). Property insurance costs will be equal in both cases and are mandatory.
But if we take a situation in which a car is purchased for the purpose of long-term (up to 5 years) operation, and in the case of leasing an individual and then repurchasing ownership, then, undoubtedly, a car loan will be a more cost-effective and cheaper way to get a car. Since the acquisition costs (excluding insurance and mandatory expenses) will amount to 826,000 rubles for a car loan against 1,033,440 rubles for car leasing.
At the same time, our expert draws attention to the fact that:
- for mass and popular brands (Kia, Opel, Nissan, Mitsubishi, Chevrolet) and premium brands (BMW, Audi, Mercedes-Benz, Porsche and others), the discount of leasing companies can be an average of 10%, which allows you to make calculations much lower (often in two times) than for a car loan.
- for premium customers with a high income level, leasing will be a profitable and comfortable service, since it is possible to include insurance, tax payment, car maintenance and repair in the payment.
What to choose?
After the amendments to the Law "On Leasing", many experts predicted a boom in leasing transactions with individuals. After all, it would seem that the benefits are obvious. No guarantors are needed, fewer nerves during registration, and most importantly, lease payments are not so burdensome for the family budget. But the boom didn't happen.
Comparative table of car leasing and car loans:
| car loan | Leasing for individuals | |
| Property | New and used cars | Exclusively new cars of foreign production, except for Chinese cars |
| Financing term | 12-60 months | 12-36 months |
| Prepaid expense | Banks rarely issue car loans without a down payment. Minimum advance from 15% | Advance payment from 0%, but leads to an increase in the cost of monthly payments. Minimum advance payment from 20% to 49% |
| Package of documents | Standard: passport, income statement 2-NDFL, a copy of the work book. The reduced package is more expensive at rates | Standard: passport, driver's license (sometimes also income statement 2-NDFL) |
| Car insurance | Mandatory annual insurance OSAGO, CASCO. Optional: voluntary life and health insurance, financial protection programs. It is possible to include CASCO in payments | Annual OSAGO insurance is obligatory. It is not necessary to insure CASCO, but this leads to an increase in the cost of the monthly payment |
| Ownership | The car is the property of the client, but is pledged to the bank | The car is the property of the leasing company, and the client is transferred for temporary use under the contract |
| Processing speed | You can buy a car on credit in a short time with a minimum package of documents under the Autoexpress programs. As a rule, interest rates rise by 2% | You can buy a car in a short time in leasing with a minimum package of documents |
| Mileage limit | Is not limited | Mileage limit up to 25,000 km per year |
| Other restrictions | – | Departure of the car abroad only with the official permission of the leasing company |
| Additional services and service | – | The leasing agreement may include full insurance, annual technical inspections, seasonal tire fitting and storage of tires, accounting features, payment of transport tax, and so on. All this adds up to higher monthly payments. |
| Early partial or full repayment | In loyal banks, there is usually no limit on the amount and terms | Strictly not earlier than 6 months |
| Redemption value | Absent | Adjusted based on the condition of the car, can be calculated in advance at the stage of concluding a contract |
| Seizure of property | Through the court in case of delay under the contract | According to the agreement, the owner of the property is the leasing company, in case of non-fulfillment of obligations under the agreement, the seizure is made without a court decision |
»
According to experts, the main reason for the lack of demand for leasing for individuals in Russia is the tax system.
In the US, where car leasing is very popular, there is what is known as "household financial reporting." That is, the budget of an individual is treated in the same way as the budget of an enterprise. In this regard, by leasing a car, a citizen receives the same tax benefits as a businessman. In Russia, only legal entities can return VAT. For them, leasing is really beneficial, as it allows you to minimize taxes. For individuals, VAT is included by the leasing company in monthly payments.
In addition, there is a significant difference in the psychology of domestic and Western motorists. “The car is not mine - they’ll just take something away, and my money was crying.” Such reasoning stops many who are looking at car leasing. Indeed, a leasing company does not even need to go to court to claim a car in case of problems. When paying off a loan, a person perceives it as a contribution to his property.
Thus, when choosing between a car loan and car leasing, it is important to understand your needs well. If you need a high-status car and you want to update your car regularly, then most likely a financial lease without a buyout will suit you. If you want a reliable “iron friend” for many years, then a loan will be more profitable.
Tell your friends about this article and express your opinion in the comments. What do you think is more profitable: car loan or car leasing?
Greetings! I was driving around the city yesterday and noticed the abundance of advertising for car loans. Or did I just not pay attention before?
It follows from the advertising slogans that brand new foreign cars literally “give away for free in good hands”: 0% overpayment, no down payment, registration in 15 minutes, no CASCO, no income statement ... An attraction of unprecedented generosity!
But over the years of the credit boom in Russia, I have drawn some conclusions. And I am sure that a loan to buy a car is one of the most disadvantageous bank offers. So, is it worth taking a loan for a car - my personal opinion.
I am sure that a car is not an asset worth buying with borrowed funds. The only exception is when you plan to use the car for business, and it will generate income. Car loans are beneficial only to banks and car dealerships. For borrowers, such a transaction brings continuous losses.
Five disadvantages of buying a car on credit
Rise in the price of the car
Over five years, the average overpayment on a car loan is approximately 50%. And that's not counting! At the same time, the car itself (unlike real estate or business) is getting cheaper every year. After leaving the salon, a brand new car loses about 10% in value.
Compulsory insurance
Agree, not every motorist insures his car "against everything in the world." But if the car was bought with a bank loan, you will have to buy both CASCO and OSAGO! Insurance will need to be paid either separately or include its cost on credit. And every month to pay interest also on insurance.
Each bank works only with "their" insurance companies. As a result, the borrower
A loan is an extra (and, in my opinion, unnecessary) burden on the family budget. The bank will have to pay a considerable amount for several years. And in a period of economic decline, it costs more and income increases, and not look for another “headache”.
Time and effort to complete
If you buy a car in a car dealership at your own expense, you just need to choose a car, pay for the purchase and complete all the documents. If you do the same at the expense of borrowed funds, then you will have to decide on the bank, collect and submit documents, wait for a decision and sign a bunch of papers. It seems to be nonsense, but it will take a lot of time and effort.
The car is not yours
Until the full repayment of the loan, the car is almost impossible to sell, donate or exchange.
Pitfalls of super profitable offers
And now I will try to answer the question of whether it is profitable to take a car loan at a bank, a car dealership, or anywhere else. Dispelling tales of 3 super-offer tricks.
Loan without interest
In the car loan market, there are also super-profitable offers. For example, a loan with a zero interest rate on certain models. Such generosity is explained simply: the dealer agrees to sell the car at a discount, the size of which is approximately equal to the amount of accrued interest. Either the bank gives the car dealership money to buy a car, it sells it to its customers, and the bank gets the right to demand repayment of the debt from borrowers ().
Cons of a loan without interest: high interest rate, down payment from 50%, expensive insurance and a short repayment period (up to two years). And of course, the choice of car models will be extremely "poor".
Credit without CASCO
Put yourself in the place of a bank. A car is one of the most "inconvenient" pledges. It can be stolen or seriously damaged in an accident. In this case, a full CASCO is issued. Even if only one bumper remains from the car, the insurance company will return the rest of the loan to the bank with interest. Hence the requirement for compulsory insurance.
And if the borrower does not want to take out an insurance policy for 5 years? It is possible to issue a loan without it. But with a large down payment (from 50% of the cost of the car) and extortionate interest. The bank needs to minimize its risks.
The cost of a car loan with and without CASCO is almost the same. But if something happens to the car (or to you), the force majeure costs will fall entirely on the borrower.
Express loan, loan without down payment or income statements
It is tempting to come to the salon without a penny in your pocket and leave from there in a brand new foreign car. Expert opinion: any "indulgence" in relation to the borrower, the bank will definitely compensate in its favor! The more the bank goes to meet you (for example, does not require you to confirm the amount of income with certificates from work), the more expensive the client will have to pay for "loyalty".
The most profitable car loans are issued to borrowers with proof of income, full insurance and a large down payment. And, in my opinion, if you still decide to take this step, it’s worth getting confused for the sake of a discount in the interest rate.
I forgot to mention another trick that car dealerships often use. The cost of the loan includes additional goods and services (for example, additional or attachments). The amount of the loan grows - as does the size of the final overpayment.
When is a car loan contraindicated?
To be honest, taking a loan at the present time is not the best idea. According to the forecasts of "unofficial" analysts, the next year will be more difficult than the current one. And 2019 is worse than 2018... And if the global crisis is superimposed on the internal Russian crisis, it will be very sad.
In my opinion, an expensive (both in terms of amount and overpayment) car loan is contraindicated in those:
- Who has the only source of income.
- Who has a loan payment of more than 30% of the monthly family income.
- Who buys his first car (for novice car owners, the amount of additional costs becomes an unpleasant surprise). Additional expenses for a car include fuel, repairs, components, parking or garage fees, tire fitting, washing, and more.
- Who is sure that own car is more profitable than public transport. I once read an interview in which a popular presenter conducted a funny experiment. He sold his car and for a year traveled to work and business meetings only by taxi. For a year, he spent on these trips an amount equivalent to the cost of maintaining his own car!
Therefore, before you run to a car dealership for another “loan without overpayments”, carefully analyze all the pros and cons!
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