Car loan - borrow for a car at a lower interest rate

Usually, a car loan is a loan with the car itself as collateral. This means that the car you buy is pledged to the financial institute, and if you are unable to repay the loan, the car will be reclaimed and used as payment.

A traditional car loan usually covers 80 % of the car's value. This means that you need to provide a down payment of at least 20 %. It is also common that the financial institute requires the car to be bought from an authorized dealer.

Compare car loans with Zmarta

Are you looking to buy a car and wondering how much a car loan will cost you? The first thing you should do is compare interest rates in order to get the most beneficial car loan! Here are some advantages to taking out a car loan through Zmarta:

• Get a loan of up to 600 000 SEK.

• Compare car loans from up to 35 financial institutes simultaneously. 

• No collateral needed.

• Only 1 credit report from UC.

• Get a loan for the total cost of the car.

• Buy a new or a used car.

• The length of the repayment period is up to you.

Car loan or personal loan?

There are two types of car loans: Car loans and personal loans. Nothing makes one type of loan better than the other, but there are some things that are good to know before you decide which type of loan to apply for.

Personal loan to pay for a car

If you wish to take out a loan that covers the entire cost of the car, you can take out a personal loan. You will then get a loan amount that covers the total value of the car, and you do not need to make a down payment. If you choose to finance the entire car purchase with a personal loan, it is important to look at what kind of interest rate you end up with, since it might be higher than if you had applied for a traditional car loan.

Car loan without down payment

A personal loan means buying a car on installments without a down payment. If you have enough money for a down payment, it might be better to instead apply for a traditional car loan, where you only take out a loan to cover 80 % of the car’s value.

Car loan calculator – calculate interest costs

When it comes to the interest rate of your car loan, you can easily calculate your costs by using our calculator. Simply enter the loan amount, and then calculate how much the loan will cost you by entering in your details and your preferred installment period.

How interest on car loans work

Before you decide to take out a loan for a car, it is important that you calculate the actual cost of the loan. Otherwise, you are at risk of taking out a loan that you will struggle to repay.

Car loans at a fixed interest rate

When it comes to car loans and personal loans, variable interest rates are more common than fixed interest rates. This means that you are not tied to a fixed interest rate during the duration period. Car loans at fixed interest rates are less flexible, and you need to pay a breakage cost if you wish to repay your loan prematurely.

Effective interest rate

When you are calculating the cost of your car loan, you need to be familiar with effective interest rate. This is the total cost for a loan. Outside of the nominal interest rate, effective interest also includes arrangement fees, administration fees and any other fees. You will often find the effective interest rate for your car loan in the fine print.

Installment period

Consider your chosen installment period carefully when taking out a car loan. The installment period is just as crucial as the interest rate. The longer installment period you choose, the higher the cost of the loan will be. You should therefore choose the shortest possible installment period.

Note: If you take out a car loan, the car is allowed to be a maximum of 12-15 years old at the time of the final payment.

A short installment period is recommended for two reasons. One: your total cost will be lower, and two: you are not at risk of dealing with residual value – that is to say, a loan amount that is larger than the value of the car. This is why it is important to adjust the installment period according to the depreciation rate of the car.

Deductibility on interest costs when you take out a car loan

When you are calculating the cost of your car loan, you should remember to account for deductibility. Interest costs of up to 100 000 SEK are deductible at 30 % annually in your declaration. Therefore, a loan with a higher interest rate may be cheaper than a loan with a lower interest rate, depending on the cost of other fees.

Car loans with residual value

What is residual value in a car loan? How does it work, and when is it a good idea to pay for a new car using a car loan with residual value?

If you are planning to take out a car loan with residual value, you will be asked to repay your remaining debt at the end of your amortization period using the remaining value of the car. In short, a car loan with residual value means that you are not amortizing the total value of the car – instead you will have the estimated value of the car left at the end of your repayment period.

Is a car loan with residual value good or bad?

Why should you take out a car loan with residual value? If you like to switch cars often, this is a good way to finance your car purchase. In this case, you can easily trade in your car for a new one after a short time. You will also not be required to pay expensive monthly amortization costs. A car loan with residual value fits you if:

• You view your car as a short-term investment

• You drive your own company car

• You do not wish to amortize more than the depreciation rate of the car

• You wish to make use of the car’s second-hand value

Tips before purchasing a car

Buy a used car

It is often said that it is a pure loss business to buy a new car – and sure, after five years, more than half of the car's value will be gone. You can however cheat the system slightly by buying a used car that is not that old. You then get a somewhat new car, without having to face the vast depreciation that otherwise will happen as soon as you drive your new car out of the dealer's lot.

Bargain

You should start by bargaining the price down, and when you feel like the dealer is reaching their limit, try just a little bit more.

Make sure you get extras included in your purchase

When bargaining won’t take you any further, instead try and get as many extras included in your purchase as possible. This could for instance be optional add-ons such as a navigation system, a parking sensor or a sound system. Snow tyres and tyre storage are other things that a good negotiator might get without having to pay anything extra.

Account for both running and unexpected costs

It is not exactly cheap to be a car owner. You will need to pay a variety of expenses that you may not consider when buying your first car. Add costs for insurance, service, annual vehicle inspection and vehicle tax when you are calculating how much the car will cost you to own. Your financial situation can change suddenly, so make sure that you have the financial headroom to handle unforeseen events.

Installment payments instead of a loan

Most car dealers offer installment payments, which might be beneficial for you. However, you need to be aware of any additional costs that may be added, for instance administration fees and arrangement fees. These added costs could make the final price for the car higher than the original price. A tip is to keep your eyes open for promotional campaigns. Sometimes you can get a really good deal with interest-free payments when you buy a new car.