Selling a financed car: avoid pitfalls
Auto loans are usually taken out with terms between 60 and 84 months. A lot can change during this time. Maybe your living conditions have changed and you, therefore, need a different type of vehicle. Or you simply want to buy a new car after two or three years. Then the question arises: “Can you sell a financed car?”
Basically, this is not a problem. But if the car was financed with a dedicated loan or if a new vehicle is to be purchased during the term of a leasing contract, a few difficulties have to be overcome.
Complications when selling a financed car and financial losses can be avoided if you choose a flexible loan option from the start.
If you have opted for a dedicated car loan with security transfer and vehicle letter handover to the bank, a certain procedure must be followed.
Leasing instead of credit?
If you always want to drive the latest models and that means a new car every two or three years, installment loans are not the right type of financing for you. Unless you can easily afford the high monthly installments for a car loan with such a short term.
Instead, we recommend the conclusion of kilometer leasing contracts or 3-way financing with a right to return at the end of the term. Such vehicle financing has its problems. But they are more flexible if the vehicle is to be replaced after just a few years.
While you are using the vehicle, you only pay a fee for wear and tear plus costs and profits to the lessor. Simply return the vehicle at the end of the term.
You do not have to worry about the sale of the car. You also do not have to raise the funds for a possible redemption of the remaining loan and there is also no need to raise additional loan amounts for the new vehicle.
Attention: leasing contracts are not flexible during the term. Early termination of the contract is generally not possible.
The only way to get rid of the leasing contract is to be taken over by a new lessee. To do this, you need the lessor’s consent.
Even if consent is given, it is not easy to find someone to join an existing lease. Perhaps traders can act as intermediaries. There are some providers on the Internet that deal with leasing takeovers.
Choose the right loan
Selling a financed car is easy if you choose a flexible vehicle financing loan from the start.
Interest rates are often the only focus. Favorable effective annual interest rates are important, but one should not forget the conditions for the repayment phase.
Clever credit financing means keeping as many options as possible for the duration of the loan. Make sure that the bank grants you the opportunity to make generous free special repayments. Free special repayments are actually the standard. However, they are often associated with restrictions.
For example, it is stipulated that only a certain part of the remaining amount may be repaid extraordinarily and only once in a certain period of time.
Free special repayments help you to limit the amount of prepayment penalties when a loan has to be repaid.
But loans with free early repayment are even more suitable for car financing. On the other hand, credit increases without a lot of red tapes are a plus point for car loans.
A loan increase makes it easy to carry out additional financial requirements for the procurement of a new vehicle by replacing the old loan with the same bank.
A normal installment loan for vehicle financing
Check to see if you better take out a normal auto loan installment loan before you choose a dedicated auto loan.
With a freely available installment loan, you are significantly more flexible if you want to sell a financed car.
You can sell your car whenever and wherever without having to turn the bank on in any way. Because the registration certificate part II (the vehicle registration document) is in your possession.
You can also use the existing loan as you like. You can repay the loan with a new loan or with your own funds. You can also repay part of the loan under the special repayment agreement.
It is possible to increase the loan from the same bank or to take out a loan with more favorable terms from another bank, with which you can finance the new vehicle and at the same time repay the existing residual loan from the old car financing.
Finally, in addition to the original loan, you can take out a loan for the new car and pay off both loans side by side.
This solution is possible and may even be a good idea. However, two side-by-side loans that are taken out in succession have certain disadvantages. The first loan has a negative impact on the creditworthiness of the new loan.
Therefore, debt rescheduling of the old loan with the new loan is usually the better solution. Almost all banks provide a free debt rescheduling service. Of course, the loan amount must be set accordingly higher.
However, vehicle financing with a freely available installment loan has one disadvantage. Most of the time, the effective annual interest rates are a little higher. As a rule, however, the difference is not very large. With a credit comparison, you can run through several alternatives.
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