The auto loan
Need to change vehicle? Despite insufficient personal funds to buy cash, it is possible to acquire a new car using several techniques, first and foremost the car loan.
Definition of auto loan
The auto loan is part of the family of consumer loans - that is to say, operations other than those related to real estate, allowing the purchase of everyday consumer goods, the amount of which is between € 200 and € 75,000 with a repayment period of over 3 months. This large category includes revolving credit, personal loan and affected credit.
More specifically, the auto loan - auto loan, often called auto credit - is a consumer loan allocated to the purchase of a car . In case of subscription to an auto loan, when purchasing the vehicle the credit offer mentions the purpose of the loan; this is why it will be necessary to justify the nature of the purchase from the lender (for example by producing an invoice) .
The auto loan is linked to the purchase of the vehicle and this unique commercial transaction actually combines two different contracts: a sales contract, between the buyer and the seller, and a loan contract, between the borrower and the organization. credit.
Since affected credit, the auto loan is a repayable credit since its amount, duration and repayments are known in advance. The lender pays the funds directly to the provider and the borrower pays installments including principal, interest, and sometimes even insurance. Thus, he does not dispose of the entire property until the end of the repayment of the totality of the auto loan granted.
Auto loan conditions
Place of subscription: The car loan is generally offered at the point of sale, most often at the dealership, but it is possible to request it from a bank or a specialized financial institution.
Allocation of the auto loan to the purchase of the automobile: Since credit affected, the auto loan should only be used to pay for the defined automobile. So if the sale does not take place, in particular in the event of withdrawal, the car loan contract is automatically canceled.
Auto loan application: The auto loan is granted by a bank or an establishment; generally, the purchase of the automobile and the application for the loan take place in the same transaction. This is why the procedures are often carried out directly at the dealership.
Compliance with the rules of the consumer code: Like any consumer credit, the car loan is subject to compliance with the rules of the consumer code. Since May 1, 2011, the auto loan retraction period is 14 calendar days after acceptance of the offer and signature of the contract; this deadline is identical for the sales contract (since July 26, 2014). The duration of the withdrawal period is of public order, which is why no clause can shorten it. The withdrawal does not impose any compensation for the benefit of the lender, or even motivation. This code also imposes pre-contractual information on the borrower as well as a list of information to be included in the credit agreement for the car loan (designation of the vehicle, cash price, loan maturities, amount of maturities and effective annual rate. global). These obligations allow the lender in particular to ensure the solvency of the beneficiary in order to know if he is able to repay the credit. Please note that in order to benefit directly from the rules of the Consumer Code, the beneficiary of the car loan must declare that the purchase of the vehicle meets a private or family need and the lender must be a professional. If this is not the case, the credit agreement may however remain subject to the aforementioned provisions if the two parties agree.
Express agreement of the lender: The agreement of the financial institution to grant the car loan must be made expressly within 7 days from the signing of the credit agreement; failing this, the loan application is deemed refused. Since the sale of the automobile and the loan constitute the same business transaction, the purchase is conditional on obtaining the auto loan and vice versa.
Personality of the borrower: Like any credit, and more in terms of consumption, the borrower must be sure to be able to repay, on the due dates, the auto loan taken out. A car loan can be granted for the purchase of a new or used vehicle, regardless of the vehicle model (sedan, city car, sports car, etc.). However, there is no right to credit: this is why the credit institution can refuse to grant credit without even giving reasons for its decision. In this case, the vehicle sales contract is canceled; any deposit is then reimbursed for the benefit of the buyer.
Auto loan amount: Generally, the possible loan is between € 3,000 and € 45,000 for a car loan - this amount can go up to € 75,000. The offer may however vary depending on the borrower's debt ratio. The credit agreement must indicate the borrowing rate (from which the monthly interest is calculated), the annual percentage rate of charge (APR) and the amount owed by the borrower (including mandatory fees & commissions).
Duration of the auto loan: Since consumer credit, the auto loan must be granted for a period greater than 3 months (ie 3 minimum monthly payments to be paid). Generally, the repayment of the auto loan is carried out on a monthly basis.
Repayment of the credit: The repayment of the auto loan by the borrower does not begin until the delivery of the automobile. Therefore, no final payment can be made before the signature of the credit offer and before the expiry of the withdrawal period from the loan contract. However, it is possible to prepay the auto loan; in this case, the lender can sometimes claim an early repayment indemnity (IRA) although its exercise is framed by law (prohibited for a loan less than € 10,000; between 0.5 and 1% beyond).
Postponement of deadlines: There is often the possibility of postponing deadlines twice a year in the event of payment difficulties (the repayment of the car loan is then suspended until a later date).
Borrower insurance: A borrower insurance is generally offered as part of the auto loan. Optional, it generally covers various incidents (death, absolute & permanent disability, etc.).
Usual documents to provide: Photocopy of identity document, recent proof of address, photocopy of the latest pay slips, RIB, order form / proof of operation.
Other car financing possibilities
In addition to the auto loan, in order to finance the purchase of a vehicle, there are other options.
First of all, the personal auto loan is a credit not allocated to the acquisition of a car. Favored in the event of the purchase of a used vehicle, its use does not need to be justified to the lender. It therefore offers greater freedom for the borrower than in the case of an affected auto loan.
Then, the balloon credit makes it possible to reimburse only part of the value of the vehicle. This is the most suitable solution in the event of a regular change of vehicle and the monthly payments are lower.
Leasing with option to buy is a leasing contract, that is to say that, for a fixed period, the vehicle is leased with the possibility, at the end of the period, of acquiring it definitively. It therefore also makes it possible to change cars regularly.
Long-term rental allows you to rent a vehicle without however being able to permanently acquire the property at the end of the rental period.
Advantages & disadvantages of the auto loan
The auto loan, since affected credit, does not allow free disposal of the loaned sum. Indeed, it must imperatively be intended for the payment of the vehicle. It therefore offers less flexibility than a personal loan and often comes with high administrative fees. In addition, the offers made often do not meet the needs of a small amount (rare offers less than 3000 €).
Of course, like any consumer credit, the borrower must remain vigilant about his ability to repay the auto loan granted.
However, this type of credit offers considerable advantages:
- Security for the banker: Unlike a personal loan, the affected auto loan is reassuring for the lender who knows precisely what the loaned amount is intended for;
- Correlative sale / loan cancellation: Due to its assignment, the car loan is automatically canceled in the event of cancellation of the sale; just as the sales contract will be declared null and void in the absence of funding found. On the contrary, a personal loan is maintained in the event of cancellation of the sale and the sale remains valid even in the event of absence of financing;
- Reimbursement on delivery of the vehicle: The reimbursement of a car loan does not begin until the delivery of the vehicle - this is why, if this event does not occur, no sum is due; in the event of a personal loan, the monthly payments must be due even in the absence of delivery of the vehicle.
- Fixed monthly payments and known repayment period;
- In general, the repayment period is longer and the loan amount is higher in the case of an affected car loan than in the case of a personal loan.