While some of the new regulations are likely to result in some borrowing, the measure serves the interests of both parties, prospective car owners and financiers alike. Previously, a car with a 0% down payment or a 10-year term could have been purchased, but this increased the risk and led to a massive collapse in car loans.
Car loans require a deduction of at least 20%
With a maximum maturity of 8 years (96 months) . While the Recommendation does not prohibit the continuation of the previous procedure, it imposes much stricter conditions on the financiers: if equity is below expectations or they provide loans with a maturity of more than 96 months, they must set up a capital reserve for the full amount, leads to extinction.
On average, owners would change their car every five years: in the case of a 10-year car loan, if the debtor wanted to get out after five years, it would be difficult because of the significant difference between the car’s value (market value, EuroTax) and outstanding debt. In other words, even if the car were sold, the purchase price would not be enough to pay off the debt (plus, as an added expense, a few percent of the final repayment cost).
Currency risk also plays a part in the problematic car loan default
A 10-15% forint deterioration can mean that, depending on the value of the car, even several years of repayment will “disappear”, which means that you will have to pay off what you have paid in a few years.
The new regulation favors both the buyer and the financier, the bank, as it prevents mass default on credit agreements and car repossessions – the goal being to get those who can pay back their car loans safely.
Decide for a car loan now? Click here!