“It can increase the payment by more than €4,000”

Buying a car is a decision that must be considered more and more due to the variety of vehicles that currently flood the market. Many drivers debate whether it is better to purchase an electric, gasoline or hybrid vehicle, but in the end the determining factor in the buyer’s final decision is the price.

Because becoming a car owner is not exactly cheap. Not in vain, the cost of new cars has risen more than 40% in recent years, according to the Organization of Consumers and Users (OCU)which makes access extremely difficult for consumers who since 2021 have been dealing with the inflationary crisis.

In this context, in general, the majority of citizens need financing. Dealers are aware of this and to sell their cars they lower their initial price, although always conditional on financing the purchase over several years.

““Discounts offered by dealers linked to car financing rarely pay off.”the OCU has warned. “First, because the interest rates set by dealers are usually higher than those offered by banks for their personal loans; and second, because they usually include added expenses, such as an opening commission and the contracting of another product – normally life insurance -,” he explains.

This organization gives as an example a vehicle with a price of 30,000 euros for which the dealer offers a 3,000 euro discount if it is financed, so the cost of the vehicle would be 27,000 euros. Of that money, We finance 20,000 euros over 10 years with an interest of 8.75%.

“The problem is that the dealer’s loan is associated with a 3.5% opening fee and the obligation to take out life insurance with a premium of 2,610 euros. What finally translates into an APR of 13.35%,” says the OCU.

Thus, with these conditions, the total cost of financing with the dealer will add up to almost 15,200 euros. “Even subtracting the discount of 3,000 euros, it will be much more expensive than the 7,900 euros that would be paid by taking out a loan with the bank at 7% APR without conditions, which is quite common on the other hand.” Specifically 4,300 euros more will have been paid for the same car.

This group that works in defense of consumer rights also denounces that the financing contracts include “permanence clauses that establish the impossibility of canceling the financing until a minimum period has passedat the risk of paying a penalty equal to the discount applied”, something that the organization considers “abusive”.

“The savings can exceed 5,000 euros”

For all these reasons, when it comes to buying a car, he recommends it if financing is needed. “Compare the APR of the dealer’s finance company with that of the banks’ personal loans”since “the savings can exceed 5,000 euros.” “Also compare if there are products linked to the financing or loan that could make the operation more expensive, such as life insurance, payment protection insurance, a fine claim service, maintenance programs…

In the same way, it must be taken into account that “discounts for financing are linked to permanence periods during which the cancellation of the loan implies the loss of the discounts applied”.

Finally, the OCU remembers that in the event of any disagreement that the client may arise “You have 14 days to withdraw and return the money without justifying your decision without penalties.”. “You only have to pay the interest generated until the day of reimbursement.”

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