Financing a Car
How to obtain finance and leasing for used cars
Written by Ciaran Kelly
for The Kelly Report
In the fourth of a four part series, Ciaran Kelly will help Expats avoid the pitfalls and pratfalls of buying a used car in CR.
Today´s issue: financing a car
How to obtain finance and leasing for used cars
There are two ways/methods of purchasing a car in CR: cash and financing.
In this respect, the purchase of a new and used car is nearly identical. There is one important difference, and I´ll address that difference below
CASH IS KING
In the CR, there is a law on the books which states that no business can accept a cash deal over 15,000EUR (about 450,000kc). Any transaction above this figure must be carried out via bank transfer. For reasons that I do not know, this does not apply to the car industry. Dear Reader, go ahead bring a bucket full of cash. It is clean and legal to buy a car this way.
It isn´t quite so incredibly easy for non Czechs to purchase a car here in CR. I know the EU laws mandate free movement of labor and possessions, but the Czech Dopravni Inspekorat (Traffic Police) will not register a car to anyone who does not posses a registered Czech address. Therefore, one must have a living permit, a working permit or a trvaly pobyt (permanent residence) in order to purchase a car. Sorry, having a lease on property in your name does not suffice.
So how do you get that car?
1—Provide the above documentation
2—Get a really close and TRUSTED friend or family member who does have the above documentation to purchase the car (but in this case, they are the legal owner of the car, not you).
3—Have a Czech registered company to purchase the car...in other words make the car a company car/fleet car (This is quite easy, any one with power of attorney ...plna moc.. can make the purchase on behalf of any Czech registered firm) Remember, get an accountant to help claim the car on amortization.
Be aware that all car dealers (new and used) get commissions from the lease companies on every deal they make. Entire average for all Central Europe is 13% of the price of the car, but in CR some dealers are making a whopping 25% commission on each deal they sell. That is money you do not have to pay.
Example: if you lease a car for 100.000kc at 10% for 5 years. Just for easy math, that makes this example a car that you can get for 150.000kc over 5 years. But if a dealer takes 20% commission fees, now you are looking at 170.000kc over 5 years. Again, this is not exact, just an illustration.
You have a very good chance to push hard against the dealer. Make sure that no fees are included in the lease contract. Do not let the dealer stick you with admin fees, or transfer fees, or STK fees...anything like that is pure money in the dealers' pockets. Keep that money in your pocket. Believe me, the dealer will cave in. In this soft market, spring and summer 2008, the dealers are fighting for every deal. They will give in.
What type of financing products are available to Expats?
--Down deposits, called Akontace, can range from 0 to 70%
--Lease contracts can range from 1 year to 8 years (new cars 8 years, 1-2 year old cars can get 7 year lease deals. Cars older than 3 years can get 5 year lease deals)
--Insurance can be part of the lease contract...this is usually a good idea, unless you really have your heart on paying all insurance premiums immediately upon purchase
All cars must have povenne rucine. This is third party insurance. There is no room for negotiation. This is by law, based entirely on the size of the motor. Price, year and model have no effect on this insurance.
There are many other insurance products, havarni insurance is crash insurance, and this is a good idea...as is theft insurance because every year CR sees 25,000 car get stolen...One car every 8 minutes.
The CR is filled with varying insurance companies, and you can shop around and get yourself good deals out there.
Please note: some insurance companies will base the price of insurance on brand new cars...even if the car is 3,5,7 years old! Some insurance companies will offer the coverage based on the year of the car itself (for example paying 2004 rates for 2004 model). You must ask this from your dealer! Again, it pays to shop around
Ok, back to types of financing for Expats:
--Ballon payments. These are a really hot ticket right now, especially for companies and fleet cars. You spread 70% of lease payments over the first 3 to 5 years (whatever the lease length is) then you pay the final 30% in one last payment. This is a huge win-win. The customer can part exchange the car on that last payment, and the dealers get a "new" used car to sell. You can easily see why companies love this, as they have to resupply their fleet cars every so often and this is a great way to keep costs down...sure is better than buying a new car every year. Easily obtainable for individuals as well.
--Rates from the lease companies are as low as 6.9%, but you must have certain levels of income for this. Often the CR has 12% or so, but you can push this down to 8% if you take the time to shop around.
In order to get leasing, companies and individuals will have to provide some sort of "proof of income". It can be tax statements from CR or bank accounts from any country.
This information must be provided with the documents I described above.
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