Best Car Loan in Germany [2024 English Guide]

Car Financing in Germany: Discover the Best Car Loan Options and Learn How to Apply for a Vehicle Loan Today. Find the Car Financing Solution that fits Your Needs.

Key Takeaway

• Compare the car loan offers on comparison portals Check24*, Verivox*, Smava*, and Finanzcheck*
• Do not accept the first offer you get. Calculate the total loan cost before you accept any offer.
• Never take a loan to satisfy your desires, especially for an item that loses its value with time.
• You can reject a loan offer without giving any reason. Moreover, you can also cancel a loan contract within 14 days without providing any reason.

Table of Contents

Best car loan providers in Germany

You can find the best car loan conditions on one of the following comparison portals

• Check24*
• Verivox*
• Finanzcheck*
• Smava*

Note: Comparison portals display the best interest rates and car loan conditions on their websites. But only after you apply for a car loan, you’ll get the actual loan conditions from the bank.

We recommend comparing the car loan interest rates and conditions on different portals before you sign the contract.

Don’t apply for multiple loan offers on different portals. Doing so will impact your Schufa score and make it difficult to get a loan.

Different types of car loans in Germany

There are two types of car loans offered by different providers in Germany.

• Normal car loans
• Balloon financing (Ballonfinanzierungen)

Normal car loans (Ratenkredit)

In this type of car financing, you pay a fixed monthly amount. You pay back the entire loan amount at the end of the loan term.

Such loans are cheaper than the balloon financing.

Balloon financing (Balloonfinazierung) or Three-way financing

In this type of car loan, you pay a fixed monthly amount. But you still have part of the loan to pay at the end of the loan term.

Car dealers often offer balloon financing. The reason for balloon financing, also called three-way financing, is the car dealers offer three ways to repay the remaining loan amount.

1. Purchase of the vehicle: You can buy the car at the end of the repayment period by paying the remaining balance (final payment/balloon payment).
2. Returning the vehicle: You can return the car after the end of the financing period. But you must fulfill the conditions like the number of kilometers driven, the car’s state, etc., put by the car dealers.
3. Refinancing or follow-up financing: You can continue financing the vehicle. You must conclude a new loan agreement or extend the existing financing to do so. In this case, new conditions and installment payments will be agreed to cover the remaining balance. Usually, refinancing a car is expensive.

Comparison of loan cost in different types of loans

​	Normal car loan (in €)	Balloon financing (in €)
Car’s purchase price	20,000	20,000
Down payment	5,000	5,000
Loan amount	15,000	15,000
Loan Interest Rate	6.3%	6.3%
Loan term in months	60	60
Monthly rate/installment	292.12	194.75
Last installment	292.12	5000
Total amount paid by you during the loan term	17,527.2	18,564.90
Total interest paid by you	2527.2	3,564.90
Extra you paid in balloon financing	1037.7	​

Financing a car via car dealers

Car dealers also offer car loans. But you shouldn’t accept the first offer you get.

You must compare different car financing offers on comparison portals like Check24*, Verivox*, Smava*, and Finanzcheck*.

Advantages of financing a car via a car dealership

• It’s less hassle as you can pick up the car and get car financing at the same place.
• No additional bank appointments and document submissions.
• You can know the car loan conditions then and there.
• They have partnerships with the banks of major automobile manufacturers like Volkswagen Bank, BMW Bank, Audi Bank, and Mercedes Bank.

Disadvantages of financing a car via a car dealership

• Car financing is usually more expensive than you can find elsewhere.
• The car banks finance cars of their own brands only. For example, Mercedes Bank offers car financing for a Mercedes Benz only.
• Do not offer cheap refinancing of the remaining loan amount.

How to apply for a car loan?

• Go to one of the comparison portals: Check24*, Verivox*, Smava*, and Finanzcheck*.
• Enter the loan amount and loan term you wish for.
• Enter your personal details or login to automatically fill in the details.
• Enter your job and family details.
• Provide your monthly net income and expenses.

TIP: Fill in all the information requested by the comparison portal, including optional, to process things faster.

• Enter the car details that you want to buy.
• Check what type of insurance you want. We recommend not taking any insurance as part of the car loan.
• Enter the bank account where you want to get the money.

Based on the above information, comparison portals will show offers from different banks. You can apply for the car loan offer you like directly on the comparison portal.

NOTE: You can compare as many offers as you want on comparison portals, but apply for the one that you find the best. Never apply for multiple offers on the same or different portals. It affects your Schufa score negatively.

Two more steps to complete the car loan application.

• Verify your identity. There are two options to verify your identity.
  • Video call with a customer advisor. It is a faster and hassle-free option.
  • At the post office: You go to a post office of your choice with your documents. A postal employee will confirm your identity on-site and forward your information to the bank.
• Last but not least, upload documents requested by the bank. Banks usually process the application within 2 to 3 days.

If the bank accepts your application, it’ll send you a contract. Sign the contract and send it back.

Note: You can accept or reject the car loan offers without providing any reason. Moreover, you can cancel the car loan within 14 days of signing the contract without providing any reason.

Requirements for financing a car

What do you need to finance a car in Germany?

You need the following documents to apply for a car loan.

• You must be at least 18 years old.
• Personal identity document. It could be your passport, residency card, etc.
• Proof of income: last 3 months salary slips, work contract, income tax statements if you are self-employed.

Once you buy the car, you must also submit proof of car purchase or vehicle registration certificate. Which document you must provide depends on your car loan’s terms and conditions.

Financing a car — what requirements does the vehicle have to meet?

You can finance any car if you meet the creditworthiness requirements of the bank.

However, lenders also have certain requirements for the vehicle to be financed.

• The car must be intended for private use
• The car must be registered in the name of the borrower
• The car must not exceed a certain age during the loan term
• You must take a comprehensive car insurance

How do banks determine your creditworthiness for the car loan?

Banks calculate your creditworthiness to provide you with a binding car loan offer. The method to calculate it is different for every bank.

But in general, banks consider the following aspects.

• Age: You are of legal age, i.e., 18 years.
• You live in Germany and have a valid visa or residence permit. Car loan interest rates offered to Blue card holders are higher than to permanent residents or citizens.
• Stable income source: People with permanent job contracts get better car loan conditions than people with fixed-term contracts.
• Schufa score: Check for any incorrect Schufa entries that may negatively affect your Schufa score.
• Liabilities: e.g., other loans, spouse maintenance, etc. The fewer liabilities, the better car financing conditions you can expect.
• Taking a loan alone or with your spouse: Car loan conditions are usually better if you take a car loan with your partner. The reason is that the bank’s risk in this situation is spread out among two individuals.
• Car model: Banks also consider the car model when issuing car loans. Some banks offer better conditions for hybrid or electric cars.
• Car as collateral: Putting the car as collateral might fetch you better interest rates. Again, the risk for the bank in this situation is lower as the bank can recover the loan by selling the car.
• Downpayment: Interest rate varies based on the amount of loan you apply for and the car’s value. The higher the downpayment, the better car loan conditions you may expect. E.g., interest rates are higher for 100% financing than 80% financing.
• Duration of the loan: Interest rates increase with the increase in the financing period.

In short, the lower the risk for the bank, the better car loan conditions you’ll get.

How much does a car loan cost?

The cost of a car loan depends on the loan interest rate and the loan term. You can see the total loan costs for different terms and conditions in the below table:

Loan amount	Loan term	Interest rate	Monthly rate	Total cost
10,000	48 months	6.3%	236.25	11,340
10,000	60 months	6.3%	194.75	11,685
10,000	72 months	6.3%	167.17	12,036
10,000	48 months	2.26%	218.12	10,469
10,000	60 months	2.26%	176.45	10,587
10,000	72 months	2.26%	148.68	10,704

As you can see in the above table, the faster you repay the loan, the less interest you pay. Hence, try to repay the credit as soon as possible. Especially when the interest rates are high.

Tricks to pay less for a car loan

Here are some ways you can get a cheaper car loan.

• Some banks offer better conditions for personal loans than car loans. Hence, also check the conditions you are getting for a personal loan on the comparison portals Check24*, Verivox*, Smava*, and Finanzcheck*.
• Reduce your loan term. The faster you pay back the loan, the cheaper it will be.
• Increase the downpayment amount.
• Pay the entire loan within the loan term.
• Take a loan together with your partner.
• Do not take any insurance on top of the car loan.
• Get the option of special repayments. With this option, you can pay an additional amount on top of your monthly installments to repay the loan. As you repay the loan early, you pay less interest overall.
• Check the interest calculation method carefully. We have explained different interest calculation methods used by German banks here.

We recommend playing around with the different options and checking which combination results in the best car financing offer.

Do not take any insurance on top of the car loan

Almost every bank in Germany offers residual debt insurance (Rest­schuld­ver­si­che­rung in German) while offering a car loan.

Residual debt insurance pays the car loan if you die or become unemployed. Such insurance is usually expensive and unnecessary.

Instead, take unemployment and life insurance separately. Banks add the monthly insurance premium to the car loan installments. Hence making the car loan expensive.

When does it make sense to take a car loan?

In general, we never recommend buying a car on loan. However, there could be situations where it may make sense to finance a car.

NOTE: Never take a loan to fulfill your desires. Especially for an item that loses its value over time. And cars lose their value with time.

Need

You need a car and don’t have enough money to buy it. Then, taking a loan might make sense.

Still, you should explore all the options before you buy a car on loan, like public transport, car share, e-bikes, etc.

Cheap money

Taking a loan can be beneficial if the interest rates are lower than the inflation. However, you must then invest your own money to build assets.

Depending on your investment, you may earn more money over the loan term than the loan costs.

Frequently asked questions about financing a car in Germany

Can foreigners get a car loan in Germany?

Yes, foreigners can get a car loan in Germany. But you must have a

• valid resident permit (blue card or Niederlassungerlaubnis), and
• a regular source of income in Germany.

Are car loans cheaper than other types of loans in Germany?

The only difference between a car loan and other types of loans is the intended use of the credit. Hence, depending on the intended use of the loan, a car loan may be cheaper or more expensive.

For example, car loans are usually cheaper than the personal loans. The reason is banks have the car as security against the car loan.

Car loan by putting the car as collateral vs. not

Some banks require you to put the car as security against the car loan. In this case, you must submit the vehicle registration document (Zulassungsbescheinigung Teil II) to the bank.

Hence making the bank the car’s legal owner during the financing period. Thus, you cannot sell the car without the bank’s consent during the car loan period.

But the good news is that some banks only need proof of the car purchase. In this case, you are the car’s legal owner and can sell it anytime you wish.

However, if you don’t submit the car purchase proof, the bank may charge a higher interest rate on the car loan.

What is the 2/3 interest rate (2/3-Zins) in Germany?

As per German law, banks must publish the maximum effective annual interest rate they charge to 2 out of 3 customers.

For example, a 2/3 interest rate of 6% means that the bank issued two out of three loans at an interest rate of 6% or less.

This information is useful as most of the banks and comparison portals show the best interest rates available. However, very few people get loans on such attractive interest rates.

Can you deduct car loan interest from taxes?

No, you cannot deduct the interest from taxes for the loan you took for personal reasons. So, a
car loan that you take out primarily to drive to work cannot be deducted from your taxes.

However, you can use a commuter’s allowance to reduce your tax burden.