The PTZ car
Changing vehicles does not necessarily mean ruining oneself. As you have probably seen on advertising offers, it is now possible to buy a car credit for free – it’s called a PTZ car. Nevertheless, if it may seem at first glance like a very attractive offer, we must pay attention to the pitfalls of this device. This small information sheet will allow you to master the main principles of PTZ car.
What is a car PTZ?
PTZ is the acronym for the term “Zero Rate Loan” which can be described as a free loan. Indeed, its interest rate is zero, that is to say that the borrower only reimburses the lender the amount he actually received.
Under the aegis of the French government, the PTZ was introduced in 1995 to facilitate access to real estate property for first-time buyers. Many traders were inspired by this device to offer PTZ car offers. However, free credit is prohibited by law, except regulated cases. This is why it can only be offered during a purchase: a financial institution can not therefore directly offer a car PTZ. This follows from the general prohibition of sales at a loss in order to preserve competition between merchants and their good economic health. The PTZ car offers therefore actually correspond to a credit offered by a car salesman who takes the interest at his expense.
Under what conditions can you buy a PTZ car?
Since credit institutions are prohibited from offering PTZ car offers, it is directly the dealers, or the car manufacturers, who offer to take out the loan directly from them when buying a vehicle. They then bear the interest corresponding to the remuneration of the lender. Most car manufacturers offer this type of loan for their new models during temporary commercial actions.
The PTZ car is highly regulated, which is why it is subject to three conditions:
- The PTZ car is reserved for the purchase of new cars, especially the most recent models. If you want to buy a used car, forget this idea right away.
- The payback period of a PTZ car is very short, limited to two years, unlike five years for a conventional car loan.
- The customer must have at least 20% of the price of the vehicle. Indeed, without such a personal contribution, the dealer must in principle refuse to take out the car PTZ.
Therefore, the PTZ car is limited to extremely special cases, because of the prohibition of sales at a loss. Be careful therefore to attractive ads!
Points to watch as part of a car PTZ
If the borrower meets all the requirements to qualify for a car PTZ, he must nevertheless be careful to remain vigilant. Indeed, if a car manufacturer decides to offer this type of financing, it is only because he finds an interest in it: his goal is to sell as many cars as possible. The principle of PTZ car is then a way to attract the customer. Some tips to avoid falling into the trap …
- There are sometimes additional fees charged by the dealer.
The PTZ car loses all its interest since it loses its character “free”. These fees generally correspond to management, negotiation or even insurance costs with the lending financial institution. It must therefore be taken into account in the calculation to find out whether it is advantageous for the borrower to take out such a loan.
- Think about accounting for one’s finances with the device of the PTZ car.
As we have seen previously, a PTZ car has a refund period limited to two years. It is sometimes even shorter. Admittedly, the client is more easily free of credit, but monthly payments are often substantial. The risk is that you will not be able to repay the loan when the buyer’s ability to borrow is limited.
This is why it is essential that the lender thinks correctly before subscribing to a car PTZ by calculating this borrowing capacity, which is the amount that one is able to borrow. For this, it is necessary to draw up its monthly income and all the recurrent or foreseeable expenses (rents, monthly payments of current loans, taxes, …). The general rule is that all monthly installments of all loans must not exceed one-third of the monthly income.
- Monitor the purchase price of the desired vehicle.
If the car dealership offers a PTZ car, it is obliged to take over the interest of the credit. Therefore, it may be interesting for him not to offer the buyer the best purchase price of the vehicle. Similarly, the customer, fooled by the idea of receiving a “free” loan, may forget to negotiate the purchase of his vehicle properly.
In this case, it is strongly recommended to ask the dealer two quotes: one for the purchase of the vehicle with the subscription of the car PTZ, the other for the only acquisition.
It should not be forgotten that there are very advantageous offers of conventional car loans (often at an interest rate of less than 5%). To help the borrower, many comparative sites offer credit (including Angelica) identify the best proposals on the market. In addition, other alternatives are available to the driver …
The PTZ car and its alternatives
Firstly, in France, the Caisse d’Allocations Familiales (CAF) allocates a loan for households with modest resources. This only applies to the purchase of a used car, the repair of a broken down vehicle or the cost of car insurance. The amount granted is relatively small (a few thousand euros) but it can be repaid over a long period with a zero interest rate. This system only concerns the unemployed, social minima recipients, temporary workers and people with low or unstable incomes. Nevertheless, if this is your case, this prospect is certainly better suited to your situation and much more advantageous than a PTZ car.
In addition, inspired by the “zero emission, zero rates”, some car manufacturers sometimes offer PTZ car for clean vehicles with more advantageous terms than for the purchase of a conventional vehicle. Nevertheless, the previous advice also applies here since the principle of PTZ car remains the same. Especially since there is also state aid (which can be relatively important) and credit agencies offer special offers for this type of purchase.
Also, most banks offer auto loan deals for young people. While the credit granted is generally not free but they allow to have advantageous conditions: no handling fees, low amount of insurance, low interest rate (generally less than 3%). Thus, it is advisable, for a young buyer, to study these offers carefully before quickly jumping on a car PTZ.
Finally, there are multiple alternatives to the PTZ car to have a new vehicle.
- Firstly, it is possible to take out a car loan directly from the dealer or from a credit agency. It is generally possible to benefit from very advantageous interest rates, but the lender must justify the allocation of the amount received on the purchase of the vehicle.
- The lender may also decide to take out a personal loan. He may then freely dispose of the sum received and the interest rate is sometimes identical to an assigned credit.
- In addition to conventional credit, lease with option to buy is growing more and more today. The operation is that of a leasing, that is to say that each month, the driver pays rent to dispose of the vehicle, over a period generally up to 5 years. At the end of the contract, it is possible to buy the vehicle.
- A driver can also go to a long-term rental. This is more and more popular because a new car loses an average of 25% of its value in its first year. Here again, you have to pay rent and many companies are specialized in this area. Nevertheless, the counterparts are a rigorous maintenance and a limited number of kilometers.
- Finally, many banks and automakers offer balloon credit opportunities. Equivalent to the rental, the buyer pays a certain amount every month. After a certain period (usually 48 months), since the credit is not paid, the customer must return the car to the dealer or pay the balance to keep it. The actual cost of credit can then be significant.
The PTZ car, in short
The PTZ car is a loan taken out directly from the dealer to finance the purchase of a new car. Many car manufacturers offer it. It allows the price to be paid in several monthly installments at a zero interest rate. Nevertheless, several conditions must be met by the buyer who must ensure that he can properly repay the credit subscribed. Indeed, it is characterized by a very short repayment period and therefore significant monthly payments. Because of this, it is advisable to consider other possible options, especially since such a loan can often hide other counterparties who can raise the slate quickly. top