How to finance a car as expat in the Netherlands?
Bynco regularly receives questions from expats about financing options and lease options for the purchase of a second-hand car. In this blog we try to answer all these questions.
What is an expat?
Expats are highly educated people, between 18 and 75 years, who do not work in their country of origin. They do not have a Dutch passport, but are enrolled in the municipal basic administration. They are either sent by their foreign employer to the Netherlands, or they are sent to the Netherlands by a company because they have a particular expertise. Worldwide there are about 50 million expats.
Number expats in the Netherlands
In 2015, the CBS, the Central Bureau of Statistics, started to identify the group of expatriates. According to the latest figures, there are approximately 57,000 expats in the Netherlands. Expectations are that this will increase in the oncoming years. Our country is a popular destination for expats and is currently in 13th place. Apart from the good facilities The Netherlands has to offer, it is also financially attractive to live and work here.
One of the advantages is the 30%-rule. This scheme for incoming employees means that for the first 30% of salary, when conditions are met, no income taxes have to be paid.
The 30% ruling applies to you if you have been recruited outside of the Netherlands or have been sent abroad from a country other than the Netherlands to work in the Netherlands. In order to make use of the 30% facility, the following conditions apply from 1 January 2012:
- You are employed.
- You are recruited from a another country by your employer or you are sent out from another country to your employer.
- In the 2 years prior to your first working day in the Netherlands you lived more than 16 months outside the Netherlands, as well as at a distance of more than 150 km from the Dutch border. More about that can be read at: you live more than 150 kilometers from the Dutch border.
- You have a specific expertise that hardly can be find on the Dutch labor market.
- You have a valid order.
That sounds attractive, but having an expat status also has disadvantages.
No financial history in The Netherlands
Most expats come to the Netherlands for a new employment. They are recruited for a very specific function and therefore have not yet built up financial credit in the Netherlands. Particularly the big banks such as ING, ABN AMRO and Rabobank generally require a guarantee, and without a BKR history it can be difficult to get financing. Most banks require a 3-year employment history to qualify for a personal loan as an expat.
Types of funding for expats
In addition to traditional banks, there are also a number of specialized companies that provide car loans. In most cases these offer 2 possibilities: financing or lease.
There are 3 types of financing that you can qualify for as an expat:
- Continuous credit
- Final Term Financing
- Personal loan
A common form of credit is the Continuous Credit. This is not entirely strange, because it is a form of credit in which you yourself determine to a large extent how much you pay off per month. A monthly repayment of 2% of the credit amount is customary, but if you wish so for personal reasons, you can also suffice to pay 1% or 1.5% on the loan amount. Your monthly payments are extremely low. Since this form of credit always allows for early and penalty-free repayment, as well as the withdrawal of already repaid funds, you determine the duration of your loan for yourself. When you take out an continuous credit, it is possible to build in extra space. This has a number of advantages. Often a lower interest rate is possible, you always have extra money at hand, being in the red at maximum interest is no longer a necessity.
Final Term Financing
With a Final Term Financing, the future value of the object to be purchased (eg car/motor/caravan/etc) is taken into account. You only pay interest on this residual value (sometimes guaranteed by the dealer), which makes the monthly installment considerably lower than when you pay off the entire financing. An ideal solution for those people who want to buy a new car or motorcycle every 2 or 3 years and still want to enjoy a low monthly charge. At the end of the term (maximum 60 months), after you have fulfilled all the terms, you have the following three options:
- You exchange the car/motor/caravan against a new one and take out a new loan.
- You keep the car/motor/caravan and pay the 'final term' in 1 time.
- You keep the car/motor/caravan and finance the 'final term' at a very favorable rate.
A popular form of financing is the Personal Loan. As with Continuous Credit, it is advisable to bring the monthly repayment into line with the expected useful life of the object to be purchased (eg car/motor/caravan/etc.). The term of a Personal Loan can vary between 12 and 180 months. If you want a long term, the monthly costs remain low. But you can also opt for a short term, although the monthly costs are of course higher. The interest on the loan amount is already determined at the conclusion of the Personal Loan and remains the same during the term. In the end you pay a fixed amount every month. This way you know exactly where you stand.
Lease-options for expats
There are 2 types of financing that you are eligible for as an expat: financial lease and operational lease.
Financial Lease is a form of financing intended for the purchase of company cars and passenger cars. An important difference from an Operational Lease is that at the end of the period you own the financed object.
You have the choice from two financing options :
- You pay the whole investment amount (excluding VAT) in equal monthly terms.
- You build in a 'final term' coupled to the residual value so that the monthly payments become lower.
The advantages of Financial Lease :
- You retain investment space for your core activities
- The possibility of interest deduction means a fiscal advantage
- Even if the liquid investment space is not sufficient, you can purchase a company car
- The car is on your company balance
- Budgettable costs thanks to fixed duration
- You pay a fixed amount per month on interest and repayment
- A deposit belongs to the possibilities
- Lower monthly amount thanks to final term possible
- Expansion with service components possible
- Financial Lease also without proof possible
When you are a starting entrepreneur in The netherlands and you have no year figures to show at the bank, it's in some cases possible to obtain a Financial Lease without having to see any figures. This does require a deposit on the car being paid.
With Operational lease, both the management and the financing of the car are taken over by the leasing company. They are legally and economically owner of the car and bear the economic risk. After the duration of the lease contract, the car returns to the market. Operational lease can be compared to long-term rent. It is good to know that the economic risks that motoring can bring along, are taken out of your hands.
The advantages of operational lease:
- The car is not on your company balance
- You do not run any residual value risk
- You can budget your costs thanks to a fixed term
- You pay a fixed amount of interest and repayment per month
- A purchase option is possible at the end of the term
- Expansion with service components possible
Expat and lease
'It is often not possible for expats to lease a car according to the traditional lease channels, but there certainly are financing possibilities', says Theo Koper, co-founder of Independent Expat Finance. Together with two partners, Theo specializes in financial services for expats and non-residents. They view every situation individually. 'It is precisely in this group that it is impossible to reach general conclusions. No expat situation is the same. We have to deal with different types of employment, family combinations, countries of origin, as well as living in a rented or owner-occupied home has influence on the financing possibilities', says Theo.
More help for other possibilities
'Expats in particular need more help. Both with the language and the laws and regulations. Handy online tools such as a loan calculator do not work for expats', continues Theo. 'This must really be viewed per individual. If there are no options for a personal loan, for example because of a short-term employment or a non-EU status, we look at other financing options such as a broadening of the mortgage. Generally, there is always a solution to find, you just have to look deeper into the system. And we do not give up if the computer says no.'
Personal service at bynco.com
If you are intersted in buying a car at bynco.com, please do not hesitate to contact us. We can introduce you to some of our contacts specialized in financing for expats. We were able to help a lot of expats on their Dutch car.