Finance

Private lease car can cost you tens of thousands of euros in mortgage

That’s what mortgage advisors and the Home Owners Association say. The money that you now spend on a private lease for your car will then count more heavily in the financial obligations you already have.

Borrow less

The maximum amount that you can borrow for your mortgage already takes into account the money that you have lost on a private lease.

For example, 65 percent of the amount that you pay on a private lease is deducted from the monthly amount that you are allowed to spend on a subsequent loan. But that will go to 100 percent as of April 1, 2022. So you can borrow less with an equal income

Don’t borrow too much

Banks use the standards of budget information institute Nibud to see how much money someone can borrow. According to the Nibud standards, you can only spend a certain part of your income on housing (with a house for sale: interest and repayment). That is to ensure that consumers do not borrow too much and get into trouble as a result.

But if you already have financial obligations, such as for a private lease, this will be deducted from the amount that you can still borrow, for example for your house.

More and more private lease

An example of such financial obligations that you may already have is if you drive a car with a private lease contract. This concerns more and more Dutch people. According to the VNA (Association of Dutch Car Leasing Companies), there were more than 214,000 private lease cars in our country at the end of 2020. That is about 3 percent of the total number of private cars.

In advertisements for cars, in addition to the new price, it often states how much you will spend on a private lease.

Save you tens of thousands of euros

If you drive a Toyota Yaris via private lease, with a contract for four years, it will cost you at least 304 euros per month, according to Martin Hagedoorn, Mortgage Manager at De Hypotheekshop.

Now 65 percent, or 198 euros, of that burden is included in the financial obligations you already have. But that will be the full 304 euros per month in 2022, or 106 euros more per month.

This means that you can spend 106 euros less per month on interest and repayment of your mortgage.

With a monthly income of 40,000 euros per year and a mortgage interest rate of 2 percent, you will soon be able to borrow just under 29,000 euros less compared to the current assessment and if you lease a more expensive car, for example a Skoda Octavia Combi, the difference increases to almost 50,000 euros, Hagedoorn calculates.

Even with a mortgage without NHG

There are also consumers who do not borrow money for a car, but pay for it themselves. They may have had to save first, but they can then borrow much more for their house. If you own a Toyota Yaris, that saves more than 82,000 euros in mortgage compared to a private lease, and if you drive a larger car, such as a Skoda Octavia Combi, that makes almost 140,000 euros.

The total amount that you can borrow according to the Nibud standards, of course, depends on your income, but also on, among other things, the interest rate and the term of your mortgage. The stricter rules will also apply to mortgages without NHG, explains Peter Davina, spokesperson for the foundation BKR (where the loans taken out by households are registered).

Buying off a lease also costs money

“Consumers not only conclude lease contracts for a car, but sometimes also for a central heating boiler, refrigerator or washing machine,” said Hans AndrĂ© de la Porte, spokesperson for the Home Ownership Association. “But with cars it’s about the highest amounts.”

According to him, the difficult thing is that you conclude a lease contract for a car for a number of years, so that you cannot just get out of it. You can buy it off, but that also costs money. This is also the reason that from 1 April 2021 this obligation will no longer be tested for 65 percent, but for 100 percent.

‘Not everyone realizes’

Anyone who wants to borrow as much as possible for a house will soon be able to take out a lower mortgage, concludes André de la Porte. The consequences are therefore less severe for households that do not want to borrow as much as possible.

“Consumers are told that the amount they spend each month for their private lease contract is registered with the BKR. But they often do not realize that this can have consequences if they want to borrow money next time,” Hagedoorn adds.

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