Up to 46 percent discount on new cars – never was a new car in the last 10 years cheaper than in August and September 2017. This shows the car discount index of the University of Duisburg-Essen. At the same time, the annual interest rates for car loans are at historically low levels. Never has a vehicle financed more cheaply in the last 4 years than currently. According to information from the Smava credit portal, the average interest rate on car loans has been below 3 percent since March – an average of 2.97 percent in August and September. Over the same period, demand for car loans increased 24 percent from the previous month. Despite the overall very favorable conditions car buyers should not be dazzled: The high discounts are not forever and not for everyone. Moreover, not every car loan is as cheap as it is advertised.

Highest discounts on the VW Passat and Skoda Octavia

According to information from the Car Center of the University of Duisburg-Essen, car buyers could save based on the new car list price and basic models of the Skoda Octavia and VW Passat Trendline with 46 percent the most. The Skoda cost instead of 17,450 euros only 9,386 euros. The price of the Passat fell from 26,750 euros to 14,486 euros. The lowest discount was the Mazda CX-5 Prime Line. Instead of 24,990 euros, this vehicle cost 19,927 euros. That’s a 20 percent discount.

Discounts will fall by 2018 at the latest

The high discounts are possible because many car brands offer scrapping and environmental premiums for old diesel vehicles in addition to their normal discount campaigns. As a result, the total discounts rose to 46 percent. From the high discounts benefit so first and foremost owners of diesel cars. The conditions on which the premiums are linked vary from manufacturer to manufacturer. There is only one thing in common: the premiums are limited in time. They end after information of the car newspaper and Finanztip at the latest on 31.12.2017. After that, the new car discounts will fall again.

Demand for car loans increased by 24 percent

According to information from the Smava credit portal, interest in car loans increased by an average of 24 percent in August and September compared to the period between January and July 2017. The increase can also be attributed to the historically low level of interest rates. Those who completed a car loan four years ago paid on average an effective annual interest rate of 4.75 percent. In August and September 2017 the average was 2.97 percent. With a good credit rating, even interest rates of less than 2 percent are realistic. The portal assumes that interest rates on auto loans will only fluctuate slightly over the coming months.

Bank or dealer financing?

Car dealers often advertise with even lower interest rates. Therefore, for the car buyer, the question arises whether financing through the dealer is not the cheaper option than going to the bank. It should be remembered that this is a mixed costing. The interest may be cheaper at the dealer than at banks, but the vehicle can be more expensive than another dealer. It is therefore about the total cost, so the costs incurred for the car and the loan in total. It is clear that the variant of bank financing offers more choice: It can be used both the cheapest purchase offer and loan offer. The latter can be found with the help of loan portals, which at the same time compare loan offers from several banks and thus give a larger overview than a single bank.

Installment Loan, Private Leasing, Balloon Loan or Three Way Loan?

An installment loan is usually not only the most calculable way to finance a car but often the cheapest. Unlike the other forms of financing, installment loans are transparent from the start. The monthly rate can be adjusted to the individual options over the term. A high final payment does not exist, unlike the other loans. In addition, the vehicle belongs to the buyer after the last installment.

Further, reduced by cash payment purchase price

A loan gives even those car buyers, who do not have enough liquid funds, the chance to pay for the new car in cash. This does not necessarily mean that the buyer has to go to the dealership with a full briefcase. The point is that the car is paid for in full with one payment. As a result, experience has shown that the purchase price can be further reduced. The amount of the additional discount is a matter of negotiation. With the current low interest rates, it is likely that the cost of a loan will be at least offset by the additionally negotiated discount.