What about the buyer side? The interest of LOA compared to conventional car credit is more difficult to highlight. It all depends on the relationship you have with your car. The LOA indeed requires breaking away from the idea of ownership, since the car that you drive every day actually belongs to your bank. In exchange for which you benefit from certain advantages.
The first is budgetary. The rent paid in fact generally covers all the costs linked to owning an automobile: above all, maintenance, but potentially also insurance and assistance in the event of a claim ... The LOA therefore makes it possible to have a certain regularity , and real visibility on its budget linked to the car, away from unpleasant surprises.
Second interest, flexibility. "At the end of the contract, I can keep my car, resell it or return it," argues Christophe Michaeli. No need, if you want to change, to bother to post classified ads and negotiate the price.
From January to November 2018, specialized find best car dealer that take bad credit near me establishments distributed 411 million euros for LOA financing of used cars. An amount which still represents just over 10% of this market, but which is growing strongly: + 42.6% compared to the same period of 2017, when conventional credit registers “only” 11 , 2% growth.
Simpler, more flexible, the LOA is however a little more expensive than a conventional loan. To assess this cost difference with conventional financing, we went to the Renault manufacturer's website to simulate the purchase of a Clio IV, the best-selling car in France in 2017, presented at the entry level at the price of 15,300 euros.
Here are the financing offers, excluding optional insurance, offered by DIAC, the specialized subsidiary of the car manufacturer (2):
LOA over 49 months ( Renault New Deal ), with a ceiling of 10,000 km per year: 48 monthly payments of 204.23 euros after an initial rent of 1,500 euros. After 4 years, payment of 6,650.81 euros to exercise the purchase option. In the end, in this case, the total cost of purchasing the vehicle is 17,953.85 euros .
Classic loan over 48 months with 1,500 euros in contributions: 48 monthly payments of 305.14 euros, at a fixed APR of 2.99%. Total cost of vehicle purchase: € 16,146.72 .
The difference between the two financing methods for this same vehicle is therefore not negligible: 1,807.13 euros . It is not clear, on the Renault site, whether the proposed LOA financing includes vehicle maintenance. But even including it - estimated at € 1,688 over 4 years (3) - the LOA remains a little more expensive. It also presents some risks. The mileage, first of all, is limited, and exceeding this limit generates penalties. It is recommended, then, to be careful: the car must indeed be returned in good condition, and everything that does not fall within the scope of normal wear and tear is invoiced.