How To Get a Car Loan in Germany?

Nov 20, 2021Banking and Finance, Car in Germany

A car loan is the best solution when you are about to buy a car but don’t have enough savings in the bank account. Luckily, it’s relatively simple to finance a vehicle in Germany. In fact, you can take out a car loan or finance it at the car dealership.

Foreign nationals can receive a car loan to finance a car in Germany. The main requirements include residence in Germany and a stable source of income, preferably through employment. Car loans are available in traditional banks, peer-to-peer lending companies, and car dealerships.

Whether you buy a new or used car from a dealership or private seller – you can finance it with a loan. In this article, we explain how foreign nationals can receive a car loan as well as your best car financing options in Germany.

Finance a car as a foreigner in Germany

A typical new mid-range car will cost you from 20,000 EUR to 40,000 EUR, depending on the model and the options you choose.

Most people don’t have such large sums sitting in their banking accounts. You might not know it, but car loans are the most common way Germans finance their vehicles. Only a few people buy cars in cash. In fact, 59 % of all loans in Germany are used for car financing.

Wondering if foreigners can buy a car in Germany?

Hence, there are many ways one can finance a car in Germany. Even as a foreign citizen, you have a wide variety of options.

Financing a vehicle in Germany is also very beneficial since interest rates are very low. For a car loan, you will usually need a down payment of a couple of thousand euros.

Car financing in Germany

If you don’t have enough cash to buy a car, you can finance a vehicle in Germany. There are a wide variety of loan providers who will secure reasonable financing conditions for your purchase.

You can select between traditional banks, e.g., Sparkasse, or more flexible financing options such as Auxmoney and Smava.

Generally, there are two main ways to get a car loan in Germany:

  1. Car loan from the bank or other financial institution
  2. Car financing through car dealer

Car financing or leasing? Read in this article for would be better for your case.

1. Installment loan (Ratenkredit)

Classical private loan with fixed monthly installments is the most common type of car loan in Germany. Such loans are given based on your creditworthiness.

Due to the higher security, most German banks offer very good and better conditions for car loans than other financing reasons.

In that case, the borrower must provide the registration certificate Part II when applying for a loan. Hence, it gives banks more security. Furthermore, lenders make a basic down payment of a few thousand EUR.

Check out competitive rates from Postbank, 1822direct, NetBank.

Keep in mind that car buyers can’t sell the vehicle during the loan period is still running. Usually, it’s around 5 years.

You can select between dozens of banks that provide such financing options or opt for one in your house bank.

To receive a loan, foreign nationals need to have their primary residence in Germany and some stable income.

Nonetheless, banks are more careful with the SHUFA (credit) scores of applicants. If it’s slightly off, they might refuse your application.

Your own (current) bank is usually the best option for a car loan since they know your creditworthiness and can quickly approve your request. The main drawback is that they might not always have the best interest rates.

In addition to the main banks, you should check the offers of direct banks like DBK. Car financing online with the direct bank is often cheaper than financing the car through the branch bank.

Direct banks employ fewer staff, don’t have physical branches in Germany; hence their costs are lower.

Standard banks provide competitive rates of interest to their customers. So you can try approaching your banking for a loan.

Depending on the car price, a car loan term can range from 24 to 60 months. The best interest rates are offered when a 20% down payment is made. However, the earlier payout of the bank loan might cost you money.

Check your SHUFA score here before applying for a loan.

Read more about loans for foreigners in Germany in this article.

Peer-to Peer loans

Another option to finance a car in Germany would be taking out a peer-to-peer loan. They are more flexible in their terms and requirements than traditional bank loans.

Peer-to-peer loan providers are still new on the market but have become widely popular due to the ease of the application and high acceptance rate.

In such companies, loans are financed by private investors, so they are more tolerant to the applicants. Hence, the requirements are lower, and getting a loan is more accessible.

Advantages of car loans from peer-to-peer providers:

  • Easy application process
  • Fast approval and payout
  • Low interest rates
  • Tolerates lower SCHUFA score

Auxmoney and comparison platform Smava are the two largest providers of private loans.

Auxmoney is known for its high success rate when taking a car loan. You can borrow between 1,000 EUR and 50,000 EUR for the duration between 12 and 84 months.

Another option will be to finance your car with Smava. You can find and apply for various loans in Germany on this platform, including online and classic financial institutions.

Smava is rated as 5 out of 5 in finding credit in Germany. With Smava you can apply for loans in banks like Commerzbank, Postbank, Unicredit, Sparkasse, Deutsche Bank.

Here you can borrow between 1,000 EUR and 120,000 EUR. Both services have a speedy payout time. You will receive the money within days.

Car loan via car dealership

Some people prefer to finance their car directly at the car dealership. Every car dealer has a partnership with some bank, where you will be applying for financing.

Hence, banks like Volkswagen bank, BMW bank, Audi bank, and Mercedes bank collaborate with car dealers and specialize in providing car loans for car buyers.

Financing through a car dealer offers different advantages, such as an easy and speedy process. You can select the car and request financing right there at one spot.

Therefore, no additional bank appointments, no further paperwork are needed. Furthermore, you will get the answer regarding the financing right there at the dealership when buying the car, yet rates aren’t always the best.

The car dealer will check your credit score online and will initiate a credit request with the bank. Once approved, he will inform you.

It’s recommended to select a “Schlussrate” option when financing a car through the car dealership. This will secure the lowest interest rate and the lowest monthly installments for you.

Example of the car loan

You might see the following numbers when taking a standard car loan in the bank:

Bank loan
Car price 24,700 EUR
Down payment4,940 EUR
Monthly installment 599,63 EUR
Loan term36 months
Interest rate 5,99%
Total car cost 26,526 EUR

Best places to get a car loan in Germany

There are many banks in Germany that provide car loans for private clients.

According to the ranking, some of the best car loans in terms of conditions and approval can be found in Postbank (score very good), with an interest rate of 1,55%, as well as in Bank of Scotland with an interest rate of 1,48%.

In the third place is the bank Barclaycard with an interest rate of 2,49% for car loans. Furthermore, you don’t have to submit a vehicle registration document to any of those banks.

Below you can see the car loan conditions in the biggest German banks when taking out 20,000 EUR for 60 months (classic car loan).

BankMonthly instalmentInterest rate
Postbank346€3%
DKB357€5,6%
Deutsche Bank348€3,48%
TargoBank348€3,48%
1822direkt350€3,96%
Santander350€3,96%
Commerzbank352€4,4%
ING355€5%
Norisbank345€2,77%

Compare various car loan options

Before you opt for any of the options mentioned above, it’s crucial to compare all offers on the market. Germany is big on cars and so on car financing!

Have a look at comparison websites that can give you an idea of all banks and private loans offers and rates. That way you can grab the best deal.

To receive an individual loan offer, you must first select a loan type for a car purchase or “Autokauf“ / “Autofinanzierung” and submit a request.

After that, you will receive the best interest rates for car loans. When applying for the loan offer, you will receive approval within one day, in the best case.

Some of the best platforms are Verivox, Finanzcheck.de and Smava. With Verivox for example, you can borrow from 1,000 EUR and up to 100,000 EUR for up to 10 years. The loan can be taken online and with a same-day payout.

Also, have a look at Verivox turbocredit:

  • Interest rate starts from 0.0% p. a.
  • 100% digital, no submission of documents
  • Same-day processing incl. money withdrawal is possible
  • Special repayment
  • Pauses in payments are possible

Requirements for a car loan in Germany

Loans, however, aren’t granted to everyone who applies. You also need to fulfill particular requirements.

For example, you can only apply for car financing if you live in Germany and have income. Here are standard bank requirements:

  • At least 18 years of age
  • Main residence and residence permit in Germany
  • German bank account
  • Sufficient credit score (SCHUFA)
  • Regular income (at least 600 EUR per month)
  • Employment since at least 1 month
  • For self-employed persons and freelancers should submit at least 1 income tax assessment, which isn’t older than 3 years
  • Retirees are also eligible

Furthermore, the longer you have been living in Germany and the longer your residence permit, the better chances you have when applying for a loan in Germany.

Foreign citizens with permanent residency in Germany get the highest approval rates.

To increase the chances of getting a car loan in Germany, apply for a term that isn’t longer than the duration of your residence permit.

How to apply for a car loan

The application for a loan is very straightforward. Depending on which type of financing you choose, you might submit it online, at the branch bank, or at the car dealership when purchasing the car.

Firstly you need to prepare a down payment of around 20% of the purchase price. If you currently don’t have enough money available, you can take out a small loan to cover it. Auxmoney and Smava are perfect resources for small amounts.

You will be able to get a loan even if you buy used cars from dealers and private sellers. However, when purchasing from a private seller, you will need to apply for a different loan.

This can be a standard installment loan, which will allow you to pay for the car. That way, you can take advantage of more favorable car prices from private offers and good private loan conditions.

After receiving the loan, you can simply transfer it to the seller’s bank account or pay in cash.

What is important for car loan application?

1. Credit Score (SCHUFA): Credit score is the most crucial factor when applying for a car loan in Germany. It applies to both – Germans and foreigners.

It can be secured, by you providing a stable job and regular monthly income in the country. Don’t forget to get at least 3 payslips from work.

2. Down-payment: Clients are often asked to make a down-payment of around 20% of the car price upfront. Only after they will be able to receive financing from the bank.

The rule is that the higher the initial payment for the car loan, the easier it’s to get a loan, the lower the interest rate, and the smaller the monthly payment.

3. Repayment duration: Depending on the price of the car and the type of loan you choose, you can select the financing ranging from a period of 24 to 60 months. However, the length of your residence permit in Germany might play a role in the loan term.

Required documents for the car loan

Every bank and the financial institution will ask for a particular set of documents before approving the loan.

In general, this includes:

  • Passport or ID
  • 3 last salary statements
  • Copy of the car purchase contract or registration certificate II as proof of purchase
  • Details on vehicle
  • For self-employed persons and freelancers should submit at least 1 income tax statement, which isn’t older than 3 years

Within 4 weeks after the loan payment, a copy of the sales contract must be submitted to the bank. You can simply upload it in online banking or send via email.

If you haven’t selected the car yet, you can still apply for a car loan without mentioning the payment date. In that case, the loan will be reserved for you, and the bank will pay out the borrowed amount in 3 months. Interest applies after the payment date.

Interest rates for car loans in Germany

In Germany, the average interest rate for car loans is 5,93%.

In 2021, interest rates are still at a low level in Germany. According to the Deutsche Bundesbank, the average interest rate for consumer loans in May 2020 was 5,93%.

Here is an example of current rates for car loans in Germany.

Credit 18,200 EUR
carNew car
loan term48 months
low-interest rate 2,24 %
average interest rate3,99 %
high-interest rate 8,88 %

Therefore, the difference between the lowest and highest interest rates for car financing is 6,64%.

Car loan with no job

In Germany, it’s very rare when a bank will give a loan to someone with no job.

Without it’s almost impossible to prove the applicant’s creditworthiness, leaving alone a good credit score.

Even people with an income, for example, who receive unemployment benefits, will struggle to get a car loan in the bank. The amount of unemployment benefits they receive won’t be enough to cover monthly installments, which are about 600 EUR in many cases.

The only option to receive financing without a job is to try to apply for a smaller loan.

Recommended products and services in Germany:

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