Residents’ pockets are not only affected by bank loan repayments: car repayments are also rising sharply

Renting a car, like real estate, means that the bank margin and the average EURIBOR interbank interest rate will be paid.

The latter having reached an impressive amount, such a decision emptied the pockets of buyers. Premiums for the car purchased for residents are believed to have increased, and some claim they no longer understand how much the purchased car will be overvalued when calculating the final amount.

“I bought the car for 15,000, but about 5,000 was an advance. I was supposed to pay 126 euros per month for the car, but when the EURIBOR rate started to rise, my payments now went to 150 euros and haven’t stopped yet.

Then it seemed to me that I bought a car cheaply, the payments were minimal, but now it’s scary, because I don’t know how much more it will cost,” the reader thought.

As he assured, it is important to pay attention to EURIBOR itself.

“It’s 3 months for me and 6 months for my husband, so it’s less frequent,” she says.

Other readers shared that their premiums increased by around 40 EUR/month.

32 euro/month. It’s not serious. It’s not an apartment here, I think if you need a car buy it and you’ll be fine,” commented locals.

For the other part, the increase was more significant and reached from 75 to 100 EUR.

“Worth it or not, everyone decides for themselves,” the reader said.

Swedbank officials calculated that in terms of average payments, residents borrow on average about $21,000 to buy a car. amount of EUR, and on average they choose to repay the car loan within 5 years.

It was explained that before the EURIBOR interest rate started to rise, the average monthly rent for a purchased car was around 370 euros, but now, when currently 6 months EURIBOR interest has reached almost 4%, such a leasing payment would amount to approximately 408 euros, or 38 euros more.

Simonas Norbutas, Head of Leasing at Banque SEB, explained the same.

“Interbank interest, generally 3 month EURIBOR, after a very long period of economic recovery, until July 2022. turned positive. August 11th it stood at 3.788 percent, so, taking into account the cost of financing in general, interest has risen sharply.

It is possible to conclude a leasing contract by choosing both variable and fixed interest rates. However, due to the significant rise in EURIBOR, only a very small portion of the bank’s customers choose the latter option,” he said.

According to SEB banka, in the first half of this year, cars purchased by bank customers cost an average of 32.5 thousand. EUR, of which nearly 23 thousand are financed on average by leasing. EUR.

“Compared to 2022 At the beginning, today’s EURIBOR spread is 3.788 percent. Therefore, we can assess the difference in monthly payment by comparing two cases: with 0 percent. EURIBOR and 3.788 percent. EURIBOR .

In both cases, the financed amount of the car would be 23 thousand. EUR and 2.29 percent would apply. bank margin for a period of 5 years without residual value. Due to the rise in EURIBOR, today’s monthly payment would increase by 39.45 euros per month, reaching a total monthly payment of 445.51 euros”, calculated S. Norbutas.

However, he said he did not notice residents borrowing less.

“We have not recorded any significant change in the number of contracts concluded. However, we notice that the increase in interest rates encourages customers who sign leasing contracts to deposit a larger amount of the initial payment in order to save money,” said the SEB representative.

Indrė Genytė Pikčienė, Chief Economist at INVL Asset Management, explained that we may soon experience a pause in rising interest rates.

“The EURIBOR is influenced by the decisions of the ECB. In recent years we have observed a very tight monetary policy, there has simply been a series of increases in the base interest rates, which are based on the economic environment and especially on the lack of price stability.We have had runaway inflation and the ECB, whose main political objective is to maintain price stability, has reacted.

Today a significant number of market participants are expecting, and the ECB chief also hinted that there may be a pause in interest rate hikes at the September meeting, but this is also just a forecast and everything will depend on other inflation indicators,” the economist said.

According to her, currently, due to the reduction in oil supply, it is possible to see a rebound in oil prices, which can quickly be reflected in inflation indicators.

“However, it looks like the peak in interest rates is approaching. Looking at futures today, market participants expect interest rates to stay high for some time before rising. start falling in the middle of next year,” she said.

The Economist believes that it’s up to you whether or not to make larger purchases, which are influenced by EURIBOR rates, as everyone’s finances and income are different.

“People need to take a closer look at the current loan servicing burden and possible future trends.” Self-assess and follow the primitive but sound rules of financial literacy, that every household should have easily accessible cash,” said I. Genytė Pikčienė.