Is LOA a car loan, when it is simply a rental with an option to buy? We will see that the LOA is a consumer credit: it is subject to the same laws. An update on what you need to know about the preferred car financing solution for the French.
Is LOA a consumer credit?
The LOA is a consumer credit, since the user must pay rents each month. What differentiates the formula of a consumer credit is the outright absence of APR rates. Never displayed (because more difficult to calculate) by manufacturers and specialized sites, it could indeed put off some consumers… Our opinion on the LOA presents a comparison incorporating a rate, and it is not very beautiful to see.
The consumer is only the tenant of the vehicle for the duration of a rental contract with option to purchase. He can only become its owner by exercising the purchase option. The LOA has enjoyed incredible popular success for several years, despite the total cost always more expensive than that of conventional car credit.
All the traits of a loan, without the rate!
It is entirely legitimate to wonder whether the LOA is a credit or not. Here are several indicators that allow us to confirm that the rental with option to buy does indeed belong to the family of consumer credit.
- The car does not belong to the consumer : he reimburses rents similar to the monthly payments of a conventional loan.
- The legal withdrawal period of 14 days applies, as with any consumer credit.
- A comprehensive contract must be signed, and the lender will never agree without a large list of supporting documents (income, identity).
- The lessor is entitled to recover the vehicle in the event of default, as specified in the consumer code.
The LOA is a credit, but we are obliged to note that the absence of APR rates differentiates this formula from other loans. It is all the more important to be well informed before signing. A real fallback solution associated with small monthly payments for some, LOA is certainly not the best new car credit solution for everyone.