Changing vehicles doesn't necessarily mean breaking the bank. As you have certainly already seen from advertising offers, it is now possible to take out a car loan for free - this is called a car PTZ. However, if at first glance this may seem like a very attractive offer, we must be careful of the pitfalls of this device. This small information sheet will allow you to master the main principles of PTZ car.
What is a car PTZ?
PTZ is the acronym of the expression "Zero Rate Loan" which can be described as a free loan. Indeed, its interest rate is zero, that is to say that the borrower reimburses the lender only the amount he has actually received.
Under the aegis of the French government, the PTZ was set up in 1995 to facilitate access to real estate property for first-time buyers. Many traders were then inspired by this device to offer car PTZ offers. However, free credit is prohibited by law, except in regulated cases. This is why it can only be offered during a purchase: a financial institution cannot therefore directly offer a car PTZ. This follows from the general prohibition of selling at a loss in order to preserve competition between traders and their economic health. The PTZ car offers therefore correspond in reality to a loan offered by a car salesman who bears the interest.
Under what conditions can you subscribe to a PTZ car?
Since it is forbidden for credit institutions to offer PTZ car offers, it is directly the dealers, or the car manufacturers, who offer to take out the loan directly from them when purchasing a vehicle. They then take charge of the interest corresponding to the remuneration of the lender. Most car manufacturers offer this type of loan for their new models during temporary commercial actions.
The PTZ car is highly regulated, which is why it is subject to three conditions:
- The PTZ car is only reserved for the purchase of new cars, and more particularly for the most recent models. If you want to buy a used vehicle, immediately forget about this idea.
- The repayment period for a PTZ car is very short, limited to two years, unlike five years for a conventional car loan.
- The customer must have at least 20% of the price of the vehicle. Indeed, without such a personal contribution, the dealer must in principle refuse to take out the car PTZ.
Consequently, the car PTZ is limited to extremely special cases, due to the prohibition on selling at a loss. So watch out for attractive advertisements!
Points to watch for in a car PTZ
If the borrower meets all the conditions required to be able to benefit from a PTZ car, he must nevertheless be careful to remain vigilant. Indeed, if an automobile manufacturer decides to offer this type of financing, it is only because it finds an interest: its goal is to sell a maximum of cars. The principle of the PTZ car is then a means of attracting the customer. A few tips to avoid falling into the trap ...
- Sometimes there are additional charges requested by the dealer.
The PTZ car then loses all its interest since it loses its "free" character. These fees generally correspond to the costs of management, negotiation, or even insurance, with the lending financial institution. They must therefore be taken into account in the calculation to know if it is advantageous for the borrower to take out such a loan.
- Think about accounting for your finances with the PTZ car device.
As we have seen previously, a PTZ car has a reimbursement period limited to two years. Sometimes it is even shorter. Of course, the customer is more easily released from credit, but the monthly payments are often substantial. The risk is that when the buyer's borrowing capacity is limited, it will no longer be able to repay the loan at maturity.
This is why it is essential that the lender thinks correctly before subscribing to a car PTZ by calculating this borrowing capacity, which corresponds to the amount which one is able to borrow. To do this, you have to draw up your monthly income and all the recurring or foreseeable charges (rents, monthly payments of current loans, taxes, etc.). The general rule is that the aggregate of monthly payments for all loans should not be more than one-third of monthly income.
- Monitor the purchase price of the desired vehicle.
If the car dealership offers a PTZ car, it obligates itself to bear the interest on the credit. Therefore, it may be advantageous for him not to offer the buyer the best purchase price for the vehicle. Likewise, the customer, fooled by the idea of benefiting from a “free” loan, may forget to properly negotiate the purchase of his vehicle.
In this case, it is strongly recommended to ask the dealer for two quotes: one for the purchase of the vehicle with the subscription of the PTZ car, the other for the purchase only.
We must not forget that there are very advantageous offers of classic auto credit (often at an interest rate of less than 5%). To help the borrower, many credit comparison sites (including New Buryday Lilies) list the best offers on the market. In addition, other alternatives are available to the driver ...
Car PTZ and its alternatives
First, in United States, the Caisse d'Allocations Familiales (CAF) grants a loan in favor of households with modest means. This only applies to the purchase of a used car, the repair of a broken down vehicle or the cost of auto insurance. The amount granted is relatively small (a few thousand US dollars) but it can be repaid over a long period with a zero interest rate. This system only concerns the unemployed, people receiving minimum social benefits, temporary workers and people with modest or unstable income. However, if this is your case, this prospect is certainly better suited to your situation and much more advantageous than a PTZ car.
In addition, inspired by "zero emissions, zero rates", some car manufacturers sometimes offer car PTZs for clean vehicles with more advantageous conditions than for the purchase of a conventional vehicle. However, the previous advice is also applicable here since the principle of the PTZ car remains the same. All the more so since there is also state aid (which can be relatively significant) and that credit organizations offer special offers for this type of purchase.
Also, most of the banks offer auto loan deals for young people. Admittedly, the credit granted is generally not free but they make it possible to have advantageous conditions: no administration fees, low amount of insurance, low interest rate (generally less than 3%). Thus, it is advisable for a young buyer to study these offers carefully before quickly going for a PTZ car.
Finally, there are many alternatives to the PTZ car to have a new vehicle.
- First, it is possible to take out a car loan directly from the dealer or from a credit organization. It is generally possible to benefit from very advantageous interest rates but the lender must justify the allocation of the sum received to the purchase of the vehicle.
- The lender can also decide to take out a personal loan. He will then be able to freely dispose of the sum received and the interest rate is sometimes identical to an affected loan.
- In addition to traditional credit, rental with an option to purchase is developing more and more today. The operation is that of a financial lease, that is to say that each month, the driver pays rent to dispose of the vehicle, generally over a period of up to 5 years. At the end of the contract, it is possible to buy the vehicle.
- A driver can also go for a long-term rental. This is more and more popular because a new car loses on average 25% of its value in its first year. There again, you have to pay rent and many companies specialize in this area. However, the rewards are rigorous maintenance and a limited number of mileage.
- Finally, many banks and car manufacturers offer balloon credit options. Equivalent to the rental, the buyer pays a certain amount every month. After a certain period (usually 48 months), since the loan is not cleared, the customer must return the car to the dealer or pay the balance to keep it. The real cost of credit can then be significant.
Car PTZ at a glance
The PTZ car is a loan taken out directly from the dealership to finance the purchase of a new car. Many car manufacturers offer them. It allows the price to be paid in several monthly installments at a zero interest rate. However, several conditions must be met by the buyer who must ensure that he can repay the credit taken out correctly. Indeed, it is characterized by a very short repayment period and therefore large monthly payments. Therefore, it is advisable to consider the other possible options, especially since such a loan can often hide other counterparties that can raise the slate quickly.