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Auto loan: what is the real cost?

Blog | Car Credit | Credit

If leasing is the most known and widely used solution to get a vehicle, a loan is sometimes an interesting alternative. However, the cost remains a particularly important issue, and many drivers are worried about the real cost. All in all, which price can be expected? Our analysis.

Compare the comparable

Before having a closer look at the cost of an auto credit, it is important to remind that a loan is not a leasing. Thus, the prices aren’t comparable right away. Indeed:

  • The cost of a leasing involves only the “lease” of the vehicle. At the end of the contrat the vehicle isn’t owned.
  • The cost of a loan includes the reimbursement as well as the interest. The monthly cost is usually a little higher, but the driver fully owns the vehicle.

Elements of the cost

An auto credit works just like any other consumer loan. A financial institution, generally a bank, lends an amount of money to the borrower, amount which will be used to purchase the vehicle. The monthly payment includes:

  • A part corresponding to the repayment of the lended amount.
  • A part corresponding to the interest.

It is important to understand that the paid interest is proportional to the duration of the loan. A 6 years loan will cost twice as much as a 3 years loan.

Interest rate and calculation

The real cost of an auto loan therefore depends on the interest rate and repayment duration. A shorter-term loan will be less expensive than an long-term loan. For example, here are some costs for a 20,000 Chf loan.

Monthly bill*Total cost**Monthly bill*Total cost**Monthly bill*Total cost**

Rate 12 months 24 months 36 months
Rate 12 months 24 months 36 months
5.9% 1’719 Chf 628 Chf 884 Chf 1’219 Chf 606 Chf 1’821 Chf
6.9% 1’727 Chf 732 Chf 893 Chf 1’424 Chf 616 Chf 2’130 Chf
7.9% 1’736 Chf 836 Chf 901 Chf 1’628 Chf 623 Chf 2’439 Chf
8.9% 1’745 Chf 939 Chf 910 Chf 1’831 Chf 632 Chf 2’747 Chf
9.9% 1’745 Chf 1041 Chf 918 Chf 2’034 Chf 640 Chf 3’056 Chf

*: includes both reimbursement and interest

**: total interest for the loan

When choosing an auto credit?

The choice of a credit or a leasing depends mainly of each one’s preferences and budget capacity. Indeed:

  • Over a short period a loan is usually more advantageous than a leasing. Also, loan interest can be deduced from tax declaration.
  • Over a longer period, loan interest can quickly become expensive.
  • A loan allows to become the rightful owner of the behicle, at the cost of a higher monthly bill.

Get the best rate

Regarding loans, the interest rate mainly depends on the situation of the borrower. Indeed, a low-risk situation involves a low interest rate. On the contrary, a customer with a risky situation will have to pay more interest. In any case, it is a good idea to go through an intermediary. Indeed, the latter can help it’s customers and try to get lower rates with the banks. For auto loan, Autocredit offers a specialized service, and the possibility to get a free tailored offer with the best rate.