Car financing by bank loan or leasing? The overview

January 30, 2025

Published November 20, 2024

You have found your dream car, but don't have the necessary change for it on the side? That doesn't have to stop you from driving a new car.

According to the Federal Statistical Office, around 4.7 million passenger cars were driving around on Swiss roads at the end of 2020. A large proportion of these vehicles were not bought with savings, but on credit with a loan or a leasing contract. Figures from the Swiss Leasing Association SLV show that around 260,000 new leasing contracts were concluded in 2020 alone. In Switzerland, buying a car without savings is therefore the rule and not the exception – for new cars as well as high-priced used cars. In this country, depending on the car brand and model, up to three-quarters of all new cars are financed through leasing contracts. But which financing is suitable for you and what are the advantages and disadvantages of these options?

Find your dream car on AutoScout24 now!

Cash purchase: the cheapest option

A cash purchase is usually the cheapest option for a financially strong buyer thanks to cash rebates – especially if the holding period is more than six years. The reason: The depreciation of a new car is very high, especially in the first three years. From a financial – and also ecological – point of view, it does not make sense to buy a car and sell it again after only two to three years with a high loss of value. When you buy cash, you become the owner of the car. You are therefore free to choose the equipment and insurance. The catch with the cash purchase: You must have the total price of the vehicle available in liquid funds.

Car financing with credit

If you want to drive a car as an owner for many years despite a hole in your wallet, you can consider a consumer loan. The amount of interest and costs depends on the lender and on your own solvency (creditworthiness). The plus point: The new car becomes your property as with a cash purchase and you can only get cash rebates if necessary. In addition, you can also choose the equipment and insurance of your car freely with the loan option.

What are the requirements for financing on credit?

Whether it's a consumer loan or a leasing contract: If you have open debt collections, certificates of loss or simply no regular job, you will come to nothing with reputable credit institutions. As part of a creditworthiness check, the lender must by law take a close look at the following budget items:

Rent/Housing Costs
Steer
Obligations that are registered with the Consumer Credit Information Centre (IKO), such as current loans and leases.

Tip: If you finance your vehicle with a loan, you should definitely plan for a larger reserve in your household budget and insure the vehicle with low-cost liability and fully comprehensive insurance with a possibly large deductible.

Find a loan for a vehicle at FinanceScout24

How leasing works

Leasing means: The lessor gives the lessee his car for a certain period of time at an agreed loan interest rate. Important: The vehicle belongs to the leasing company. The lessee may only use the car for the agreed duration and under certain conditions.

At the end of the contract period – usually 12 to 60 months – there are two options: You can either return the car to the leasing company or buy it at the agreed residual value, depending on the agreement.

Leasing is similar to renting a car. The big difference: With classic leasing, you as a lessee pay the monthly interest costs for the loan and maintenance costs such as repairs or tire changes. In the case of a car rental, these expenses are usually covered by the rental company.

The different leasing options

A common variant is car leasing with mileage limits. The contract specifies the term and the expected kilometers during the contract period. At the end of the contract, the lessee can return the car without further payment if it is used in accordance with the contract. Additional or reduced kilometres will be billed at an agreed rate. Usually it is between 10 and 20 centimes per kilometre.

In the case of residual value leasing, a certain residual value is used as a basis for calculating the leasing instalments when concluding the contract. At the end of the term, the actual value is determined. The lessee must compensate for the price difference. Depending on the care and condition of the car, there may be a rude awakening.

"Full Leasing" or "Leasing Plus Offers" are service leasing packages that allow you to include fixed service costs that are incurred during the leasing process anyway directly in your instalment. The rate is usually higher than with classic leasing, where service and repairs as well as insurance are not included in the price.

What are the requirements for leasing?

As a lessee, you are the tenant of the vehicle. As such, you are obliged to take out fully comprehensive insurance in addition to the mandatory liability insurance. As a rule, you have to take a leased vehicle to a specific garage for service. In addition, you are only allowed to drive a certain number of kilometers per year. Extras such as winter tires are also usually paid for separately.

How providers calculate the leasing rate

The calculation of the monthly leasing instalments depends on various factors. These include, for example, the price of the vehicle, the amount of the down payment and the contract period. The monthly leasing amount is smaller than it would be with a loan. The reason for this is lower interest rates. Why? The leasing institution remains the owner of the vehicle and therefore has more security than a credit institution that lends money to a private individual without collateral. In addition, with leasing you only pay for the period of use.

A calculation example: The new car costs 40,000 francs. With an interest rate of 5 percent and a contract term of 48 months, as well as a maximum mileage of 10,000 kilometers per year and a down payment of 2,000 francs, the monthly leasing rate is 870 francs. The loan costs are 3,900 francs.

Discover leasing vehicles on AutoScout24!

The different types of financing at a glance

Cash purchase

The cheapest car financing is always to buy with your own cash.
You are the owner of the car and can choose the insurance freely.

Bank lending

A bank loan is more expensive than a cash purchase.
You are the owner of the car and can choose the insurance freely.
You have full design freedom over your vehicle.
A plus point: Loan interest can be deducted from tax.
The disadvantage is higher interest costs.

Leasing

Leasing is particularly suitable for wealthy people who do not want to invest their savings in the car and also want to have little to do with the service and insurance.
One advantage: You hardly need any savings.
The car remains the property of the lessor until the end of the contract.
Full leasing offers offer greater cost transparency and are all-round carefree packages.
In the case of classic leasing contracts, it is important not to ignore repair obligations, redemption costs and the premiums for mandatory fully comprehensive insurance.
When considering vehicle costs, the focus should not only be on the leasing rate, but also on an overall calculation.