Buying a car in cash has been something quite rare to see in Spain for some years. Financing is the chosen way to get a new vehicle, whether through the car manufacturer’s financial institution, a third party or our own bank. In all cases, there are some things that we must know to finance a car according to the Bank of Spain and that some, unfortunately, are unaware of.
According to the latest figures, new car financing continues to grow. A large part of the population buys their car through this method, motivated mainly by the succulent discounts offered by the manufacturer. The big problem is that we end up paying those discounts of 2,000 or 3,000 euros less later because the interests are higher than with our own bank, but it is something to dedicate another entire article to.
What the Bank of Spain says
Another problem that is less talked about is that we lack general knowledge about the obligations of financial entities, in addition to other aspects that we must know when financing a car. As with any other loan, the entity that wants to grant it to us must do all of this:
- Evaluate our solvency or payment capacity to meet the installments.
- Offer adequate explanations about the conditions of the credit offered (the installments that we must pay, the related accessory services or the expenses and commissions derived from the financing).
- Provide pre-contractual information, through the European Standardized Information (INE) document, before signing the contract with the same conditions that will be established in the contract.
With this, we will assess whether it is convenient for us to sign the loan according to the conditions that have been indicated to us and we will compare with other entities to find the best option for us. In the case of accepting financing from the dealer, there are a series of peculiarities that we must know according to the Bank of Spain:
- Entities usually offer discounts on the purchase price of the vehicle for financing it. We must know that this does not mean that buying the car with this financing is cheaper than paying for it in cash, as we explained at the beginning. The total price will have to be calculated by adding all the payments we make for the car and its financing, that is, the down payment, financing commissions and expenses, monthly installments and the final installment if there is one.
- You do not only have to look at the initial payment and the monthly payments since there is usually a high final payment that we often overlook. It is necessary to review and see the price that we will have to pay suddenly at this moment.
- We must assess whether we are interested in other products or services related to the credit contract, such as, for example, insurance that guarantees the credit. Many times they are offered and end up making the product more expensive.
- Know the permanence clauses (yes, like on mobile phones and the Internet) that force us to maintain the loan for a certain period, imposing a penalty that may result in the loss of the discount applied.
As we see, it is not only about looking at the characteristics of the car, but also at the financing conditions. Our recommendation is that you review the entire contract, make complete calculations of the cost of the financed car and go to other financial institutions to check their conditions.
