General information on car purchase

Buying a car always involves a major investment. A vehicle usually has a price in the four- or five-digit euro range, whether it is a new car or a used car. If there are no savings available, or if the saved money is not enough, the remaining balance when buying a car must be financed.

This leads to taking out a car loan — a special type of installment loan — which is then repaid in fixed monthly installments. The future vehicle owner can do many things right, but also some things wrong when purchasing the car. Doing it right in this case means that, depending on how and from whom the car purchase is financed, a few thousand euros can be saved.

Attractive offers from franchised dealers when buying a car

Every franchised dealer makes the car purchase as easy as possible for the buyer. They offer everything from a single source, from new or used cars to registration and financing. The customer signs a few forms and usually receives the car keys a few days later. Everything else is handled by the seller.

For several decades, many car manufacturers have had their own financing banks for purchasing a vehicle, or they work very closely with a particular credit institution. Their financing offers for car purchases often sound attractive, supported by various kinds of subsidies from the manufacturers.

Advantages and disadvantages of financing through the dealer

• All parties involved have an interest in concluding a purchase contract and binding the customer. The manufacturer supplies the produced car to the dealership, which sells it, increases its registration numbers and gains another customer for its authorized workshop.
• The financing bank earns from the dealer’s car sale through the loan interest the buyer pays for the car loan.
• All of this is advertised daily on television and radio, online as well as in print media such as newspapers or car magazines. Essentially, it is about binding the customer so that their future payments for the car loan and workshop costs feed into this closed loop.
• The buyer should be aware of this, and before accepting dealer financing when buying a car, they should look around for alternatives.

Car loan from the bank - cash payment discount when buying a car

Financing through the franchised dealer is an installment purchase, not a cash purchase. The high cash payment discounts when buying a car, which in individual cases can also be negotiated, do not come into play.

When buying a car the buyer signs a loan agreement, which is usually entered by the financing bank into the Schufa database, the German credit bureau. The dealer receives the full purchase price from the financing bank without having to mention anything about the discount.

It can look very different if the buyer arranges financing for the car purchase themselves. They have dozens of options with branch banks and savings banks, direct banks and online banks. Without checking closely where to get the cheapest car loan, they already have the advantage of appearing as a cash buyer at the dealership and being able to negotiate a cash payment discount when buying a car. They can influence the outcome and, depending on the make and model, may still be able to choose between several franchised dealers. In the end, acting as a cash buyer when purchasing a car can save several thousand euros.

Where to find an affordable loan for a car purchase?

Now it is about finding the most affordable loan possible for buying the car, which will, however, be more expensive than dealer financing. The exciting question is how large this difference will ultimately be. As long as the cash payment discount when buying a car remains higher than this difference, the calculation favors the buyer.

The additional costs on the car loan side are neutralized by the cash payment discount that reduces the purchase price of the car. Any euro beyond that can be considered a gain. Either the buyer thereby gains additional funds, or they use the surplus for the first special repayment of their car loan. The vehicle registration document (Kfz-Brief) must in any case be deposited as security when purchasing the car, regardless of from whom the car loan is ultimately taken.

Car loan without Schufa - the Schufa score remains unchanged

Only what is recorded in the Schufa database can be taken into account for the Schufa score. Or to put it another way, what is not recorded there will not be evaluated. The less information Schufa can collect, the better. The buyer should therefore try to find a lender for the car purchase who does not register the car loan in the Schufa database.

If a self-disclosure becomes necessary for another matter, the buyer will fill it out truthfully, including the car loan. But then only the recipient of that self-disclosure will learn about it.

Loans without Schufa are offered by credit institutions that are either not business partners of Schufa or that deliberately avoid any Schufa entries. These are German as well as foreign online banks, and German direct banks also advertise loans without Schufa.

Even if they were Schufa business partners, they refrain from subsequently having the granted loan entered with Schufa.

Conclusion: financing options when buying a car

A financing option without Schufa has clear advantages when buying a car. If the buyer takes the financing into their own hands when purchasing the car, they can influence many things. It requires more effort, but they remain their own master in every respect.

Entries of any kind, whether positive information or negative entries, often remain unchanged and visible in the Schufa data records for many years.

The car loan should remain what it is: a confidential credit transaction when buying a car between lender and borrower that otherwise concerns no one else.