Practical tip: separate financing for car and property

Practical tip: Separate the financing of the car and the property

In many new construction areas, it is not only beautiful houses that can be admired. Often there are nice cars parked in front of the houses, not infrequently fancy new cars. Outsiders sometimes wonder how people can afford such cars when they have only recently built.

Finally, this is an open secret: many builders do not miss the opportunity to finance a car at the same time as their property. In the meantime, this approach has become widespread. However, it brings with it not only advantages, but also disadvantages.

Financing a car with a real estate loan

The processing of such a financing is relatively simple. Two things are decisive. First, a property must serve as collateral, d.H. A security by land charge take place. In addition, the bank must be willing to grant such a loan. Whether or not the bank is willing to lend depends primarily on the loan-to-value ratio of the property. The more equity the builder can use in his financing, the more likely the bank is to finance a car as well. Thus, creditworthiness and equity play a major role.

Advantages and disadvantages of such vehicle financing

The main advantage of financing a car with a real estate loan is the favorable conditions. With a little luck it is possible to finance the car at extremely low interest rates. the car loans offered by car dealers often seem expensive in comparison.

However, there are also disadvantages. This includes, above all, the higher loan-to-value ratio for real estate loans. Although it depends on the individual case, it is highly likely that financing the car will lead to a lower loan-to-value ratio, which in turn will result in a higher interest rate for the loan. In this context, it should be borne in mind that this can make the entire real estate financing more expensive.
This is exactly where the danger lies. Assuming that the interest rate only increases by a tenth of a percent, but the total financing amounts to several hundred thousand euros, there is a risk of a considerable increase in the total interest burden.

Then there is the term of financing. Real estate loans are usually concluded in connection with long interest rate lock-ins. Cars are usually not driven for that long, d.H. Under certain circumstances, a car is still being paid off even though it no longer exists. In addition, there is the comparatively pronounced loss in value to which motor vehicles are subject.

Financing a car cleverly

In view of these not inconsiderable disadvantages, builders should definitely check in detail whether it is really worthwhile for them to buy a car and to co-finance it with the real estate loan. It may be possible to finance the car in this way at a very low interest rate. On the other hand, the entire financing could become significantly more expensive, so it may be better to refrain from such a solution.

In this case, it is advisable to choose a stand-alone car loan. Separate financing has its own advantages. First and foremost, there is the fact that real estate and cars can be strictly separated in terms of financing. In addition, first-class conditions now lurk in the area of car loans. Low interest rates are available even if the loan is not secured by a property.

The issue of flexibility should also not be ignored. Real estate loans are considered to be comparatively rigid, while car loans can usually be redeemed quickly and easily if necessary. Assuming the vehicle is for sale, the remaining debt can usually be repaid to the bank without any additional costs.

However, it is not possible to make a general statement as to where the best conditions for vehicle financing are to be found. Many car banks offer car loans with low interest rates. But direct banks are also playing a big role, especially in financing annual and used vehicles. Every interested party should therefore take the time to first make a comparison. Our car loan comparison provides valuable support, quickly determining where the car can be financed cheaply.

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