Car in installments: all the nuances of the purchase

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

For many people, the thing they want to buy at the beginning of their independent life is a car. Not everyone can afford to buy a good car. A car is a necessary means of transportation, especially if it is used to travel to the place of work and on frequent business trips. For that category of people who do not have enough money to purchase a vehicle, a car in installments will be the way out. In fact, this procedure is the provision of a loan without interest for the purchase of a specific car model.

A bit of history

For the first time about the provision of an interest-free loan for the purchase of a car, they started talking in the early 80s of the twentieth century. During this period, one of the major American automakers decided to sell their product, providing preferential payment terms for their customers. If a person did not have enough money to buy a vehicle, then he was offered the opportunity to deposit part of the money immediately, and the rest of the amount was distributed over a certain number of months. This method was improved all the time, and soon the company became very popular among competitors, and the world was talking aboutthe first interest-free car loan - the opportunity to buy a car in installments.

The bottom line was that the car company paid the missing part of the money for the buyer on its own, but then transferred it to the bank as a loan. The banking institution did not redeem the debt immediately and not the entire amount, but at a discount. Initially, the buyer had to pay at least 30% for the car. The amount of the entry fee could change, it depended on the period for which the installment plan was provided.

In our country, the opportunity to purchase a new car in installments has appeared quite recently.

Differences between installments and loans

Loan and installment plan for the purchase of a car, in essence, are quite similar concepts. In any case, this is borrowing money to buy a car, but if you look, they have some differences:

1. Timing. A loan is issued for a long period, the most common loan agreement is 5-10 years, while an installment car sale agreement is usually concluded for a year, or even several months.
2. The interest rate on a car loan is generally 15-20%. From advertisements, we can conclude that the installment is issued as an interest-free loan, but buyers should be aware that, in fact, there is no zero interest rate, at the conclusion of this agreement it is very close to zero, but it is not. Bank employees claim that the installment rate is 0, 5% or 1%.
3. Down payment. At the time of buyingcars on credit, it can be less than 10% of the value of the goods. Sale of cars in installments is carried out upon making an initial payment of at least 20-30%, and in most cases 50% of the total cost.

Purchasing goods in installments involves paying a large amount at once, and the remaining debt is paid in installments, with the entire debt due in a year or two at the most.

Who has the right to conclude a contract

A new car is purchased by installments by persons who can be clients of banks and conclude contracts on their own behalf. When buying goods in a car dealership and not paying the entire amount of the cost of the car, part of the money is repaid at the expense of the company, but the entire debt is transferred to the bank with which the dealer has concluded an agreement.

In any case, the buyer must be legally capable and of legal age. At the same time, the age limit is calculated taking into account how old the buyer will be by the time the last part of the debt is paid. So, at the time of the transaction, a citizen must be no older than 64 years old under an installment agreement for one year and no older than 63 years old - for two years.

Basic documents required to close a deal

In order to purchase a car by installments, it is necessary to submit a package of documents for consideration by the car dealership employees. It is much less than when applying for a loan, and consists of the following papers:

• Application for the ability to pay in installments.
• Copy of the passport of a citizen of the Russian Federation who wishes topurchase a vehicle.
• Copy of buyer's driver's license.

Documents that confirm the solvency of the buyer, such as a copy of a work book or a certificate of income, are not required when concluding this agreement.

Pitfalls

Every person who decides to make a purchase without having the principal amount of the value of the vehicle must understand that the consequences of defaulting on debt payments can be serious, up to the removal of the car. Only a citizen who has a stable income can buy a car in installments without interest.

The buyer must understand that he can repay the debt only for a year or a maximum of two. It is impossible to avoid making payments. When concluding an installment agreement, a payment schedule is drawn up. If a person who is the buyer of the vehicle cannot make a payment, then he is threatened not only with the accrual of late interest, but also with retraining in a new loan. Most often, in the terms of the installment agreement there is a clause according to which, if the payment of a part of the amount is overdue for at least a day, a car loan agreement is automatically drawn up with a rate of at least 15%.

How installment terms are determined

If the buyer does not have enough money to realize his dreams, he can buy a car in installments. The contract is signed with representativesdealership where the vehicle is for sale. The conditions largely depend on the agreements between the management of the salon and the banking institution, as well as on how much the car dealership is ready to pay the bank for providing this opportunity to its customers.

Since interest-free credit, in fact, does not exist, the buyer must understand that at least half a percent, but the car dealership independently pays the financial institution. There are also conditions that the buyer must fulfill in order to conclude the above contract. It is mandatory to have insurance. The installment plan, in its essence, is a product of three organizations: a car dealership, a banking institution and an insurance company.

Favorable conditions usually cover a certain model of vehicle, which is independently chosen by the dealer of the company. Then the bank enters the “game”, with which the car dealership has developed partnerships. The banking institution pays for a specific model at a discount, and the installment agreement with the buyer indicates the full cost of the goods. The difference between the full cost of the car and the discounted price is the bank's real income from this transaction.

Most often, when buying a car, insurance is required, which will cost 2-3% more for a car buyer in installments.

Additional costs

When concluding an interest-free loan agreement, when buying a car, you must take out an insurance policy. The main car insurance companies in Russia are CASCO and OSAGO. The amounts that will be neededto pay depends on various factors: on the make and model of the car and the year of manufacture. High insurance premiums are determined for expensive luxury cars, as well as for sports cars.

In addition to insurance costs, a car in installments will require additional costs for bank accounts to make payments. These are expenses in the amount of 10 to 20 thousand rubles for opening a bank account and making a card.

Purchasing a used car in installments

According to experts, a vehicle immediately after leaving the salon loses 20% of its total value, and after a few years - half the amount. There is nothing unnatural in the desire of a person to buy a used car. The opportunity to buy used cars in installments is provided by many banks, as well as the sellers of used vehicles themselves. Banking institutions set limits on the age of the car, individual buyers provide this opportunity, regardless of the year of manufacture of the car. The bank provides an installment plan in cases where the age of a domestically produced car is no more than 5 years, and that of a foreign one is no more than 10.

Cars with mileage in installments are purchased by concluding a sales contract marked "installment plan". When making a transaction, you must indicate the real price of the goods, so that if there are problems with payments, you do not have to lose money.

Is installment profitable

Purchasing a car on an interest-free loan or in installments is beneficial only for that category of peoplewho have a stable good income and pay the required amounts on time. Anyone who is late in paying a debt can fall into hopeless bondage.

In addition to the risk, the installment plan has only positive aspects: the procedure for concluding an agreement is simplified, it is necessary to submit a minimum of documents for consideration of the application, the payment period is short, early repayment of the debt is allowed.

Lending with a special grace period

The legislation provides for a program through which you can buy a car in installments with the so-called grace period. It is valid when opening an account with the possibility of using a plastic card. The car buyer is not charged interest on the loan during the period specified in the contract. In addition, you can deposit any amounts, even if they are significantly higher than those indicated in the payment schedule.

Usually, such a grace period lasts one year, and if the buyer pays the entire amount of the cost of the car during this time, then in fact it turns out that he bought the car in installments.