Vaidotas Gurskas, head of Citadele Leasing’s Lithuanian branch, says that each method has its advantages, and shares advice on which method is the most profitable to choose.
It is also important to consider additional costs
In order to purchase a car on lease, you will need at least 10 percent. of the down payment, but usually the interest will be variable and at least 2-3 percent. lower than when taking out a consumer loan that does not require a down payment and has a fixed interest rate. As the European Central Bank begins its cycle of cutting base rates, overall interest rates will also decline.
In addition, another important aspect is the age of the car. Normally, when buying a car on lease, it should not be older than 15 years at the end of the lease term.
“The most important thing is to assess your needs and possible additional costs. For example, we usually recommend leasing when buying a newer and slightly more expensive one, starting at around 10,000. a car costing EUR. Then you will pay less interest, but you will have to cover it with comprehensive insurance. On the other hand, when buying an older car, its price will be lower, but due to its age, it may start to break down more often – this will require additional costs in terms of both finances and your time”, – Vaidotas Gurskas, head of the Lithuanian branch of Citadele Leasing, shares his insights.
Is it worth buying from savings?
in 2024 The results of a survey* initiated by Citadele Bank in the spring showed that the majority (74%) of the respondents bought the car from their savings, 13% – leasing, and 8 percent – with a car loan. Various economic indicators also reveal the recovery of the population’s purchasing power and willingness to make large purchases.
For example, data from the European Commission and the State Data Agency show that in October, the opinion of Lithuanian consumers about financial prospects was the best since the beginning of the calculation of this indicator in 2001.
“As inflation slowed down and wages continued to rise, the purchasing power of the Lithuanian population recovered relatively quickly after 2022. inflation shocks and, accordingly, encouraged consumers to open their wallets wider and increase their consumption volumes,” shares Citadele Bank economist Aleksandras Izgorodins.
However, buying a car from savings may not always be the most beneficial decision. According to the survey* conducted in June this year, more than 75 percent of the respondents intending to increase spending on large purchases this year. they intend to finance them from their savings, but even 58% respondents have not accumulated more than 6 months. financial cushions.
“When unforeseen events occur and you suddenly need savings, a car is not as liquid an asset as, say, securities. In addition, the value of the car decreases with time. Therefore, if a person spends all his savings on buying a car, his funds will essentially depreciate. It is better to consider the possibility of using a part of the savings to buy a car, and to “employ” the other part by investing, thus protecting them from inflation and having quickly accessible savings”, says V. Gurskas.
Photo of Citadele Bank. /Vaidotas Gurskas
According to Aleksandr Izgorodin, this effect will become even more pronounced as the European Central Bank continues its cycle of lowering base rates.
“Market participants predict that the 3-month EURIBOR, which currently stands at 3%, will reach 2%. limit in 2025 in May, and in 2025 will decrease to 1.8 percent at the end
This is significantly influenced by the predicted further slowdown of inflation in the euro zone and the weak economic cycle in the euro zone, especially in Germany,” he says.
It is important to remember that regardless of whether you will buy a car by leasing or taking a loan, the amount of total financial obligations cannot exceed 40%. income.
*On behalf of Citadele Bank, representative surveys of the population of the Baltic States were conducted by research agency Norstat in March and May 2024. At least 1,000 residents aged 18 to 74 were surveyed in Lithuania, Latvia and Estonia using an online survey.
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