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10 Mistakes to avoid with a Car Credit
Buying a car with a car credit is a major decision. Avoid these 10 mistakes and you'll get on the road in your new car with a big smile and zero frustration. Let's go!
23th May 2025
Gowago has the mission to make you drive with a smile – and the journey to reach that point begins with getting the right financing for your car. Getting a car credit with Gowago is really simple: You just find a car that you like – no, a car you love – decide the credit amount and the repayment terms.
However, a car credit, or any type of credit, is a financial commitment that needs proper thinking through. And there are some tricks to it to make your life not only more affordable, but easier and worry-free.
So here are 10 things you should avoid when taking out a credit to buy your car. If you keep these things in mind, you will experience complete freedom and satisfaction. Let’s go!
- 1. Not Understanding How a Car Credit Works
- 2. Overlooking the Total Cost of Credit
- 3. Ignoring the Importance of the Effective Interest Rate
- 4. Not Knowing your Creditworthiness
- 5. Making too Many Credit Applications
- 6. Choosing a Loan Term That’s Too Long
- 7. Selling the Car Too Early
- 8. Overcommitting Financially
- 9. Not Deducting the Credit from your Taxes
- 10. Confusing Leasing with Credit
1. Not Understanding How a Car Credit Works
Thanks to Gowago, financing your car with a credit is simple, transparent, and accessible online, with just a few clicks of a button.
But just like with leasing, you really need to understand what financing with a car credit actually means. How does it impact your financial freedom? What does it do in terms of car ownership? How should you approach budgeting?
That’s why we’re breaking it down for you — clearly, honestly, and with a real-world examples to guide your decision.
When you take out a car credit in Switzerland, you are in principle getting a private credit. The fact that it is called a car credit is simply a colloquial way of describing a loan you will use to get yourself a car. It is not necessarily directly bound to a car, and the car does not act as a collateral in 99% of the cases.
"A car credit gives you full ownership from day one — unlike leasing, you decide how to use, insure, or sell your car. But with that freedom comes responsibility: you repay the full value over time, including interest."
Furthermore, you're not just borrowing money to simply use the car — you're instead gaining full ownership of the vehicle right from day one. Unlike leasing, where you pay to use the car over a span of 2-5 years, a credit allows you to do what you want with your car, when you want: drive unlimited kilometres, sell it anytime, choose your own insurance — it’s 100% yours. But with this freedom also comes responsibility.
Let’s break it down with an example:
Say you’ve fallen in love with a used Volkswagen Golf — a great choice for many reasons. You find a well-equipped model for CHF 30,000. You decide to pay CHF 5,000 upfront and finance the rest with a car credit over 60 months.
On top of your down payment, credit amount, and credit term, the interest rate impacts your monthly rate and the total cost of the credit.
Most providers offer a spectrum of interest rates, often positioning you somewhere between 5% and 12% interest. The final interest rate you receive depends on the amount of money you borrow or what you will buy with it. And, most importantly, they also take your financial history into account.
If you have had issues in the past, or possess secure assets, the bank might elect to give you a higher or lower interest rate. It depends on how much of a risk the bank deems you to be.
| Lowers Interest Rate | Raises Interest Rate |
|---|---|
| Excellent Payment History (No Betreibungen or Defaults) – If your CRIF or ZEK report shows that you've always paid bills and loans on time, banks see you as a low-risk borrower — and may reward you with a lower interest rate. | Short-Term Residency or Recent Arrival in Switzerland – If you’ve lived in Switzerland for less than a year or recently changed your permit status, lenders may consider your situation less stable, resulting in stricter terms. |
| Stable Employment & Income – Being in a permanent job (unbefristet) for several years with a steady, provable income shows financial security. The more stable your income, the more confident the bank is in your ability to repay. | Unstable Employment or Frequent Job Changes – If you’re in a probation period, on short-term contracts, or regularly change jobs, banks may view you as a higher risk — which often means higher rates. |
| High Down Payment – Contributing a larger amount upfront reduces the total amount borrowed and the lender’s risk. This can lead to more favourable interest terms. | Multiple Recent Credit Applications – If your ZEK file shows several applications in a short time, it may appear you're financially stretched or unsure — which can raise caution flags and your interest rate. |
| Shorter Loan Term – Choosing to repay your loan over 24–48 months rather than 72–84 months reduces the risk of default over time — and banks often lower the rate in return. | Long Loan Term with Minimal Monthly Payments – While low monthly payments feel attractive, they signal a longer financial obligation to the lender. More time = more risk = possibly higher interest. |
| No Other Outstanding Loans or Debts – If you're not already juggling multiple debts, you're seen as more financially stable. A low debt-to-income ratio makes you eligible for better credit conditions. | No Credit History (Thin File) – Especially for young applicants or newcomers, having little or no borrowing history can work against you — banks prefer proven track records. |
| Owning Financial Assets (e.g. House, Stocks, Large Savings) – If you have real estate, investments, or a strong savings cushion, it shows you're financially stable and better equipped to handle unexpected expenses. This can strengthen your profile and lower your interest rate — even if those assets aren’t directly used for the loan. | Lacking Financial Reserves or Assets (No Savings, Investments, or Property) – If you have no savings, no investments, and don’t own any assets like property or a retirement fund, lenders may see your financial foundation as fragile. Even if your income is steady, having no financial buffer makes you more vulnerable to unexpected expenses — like car repairs, medical bills, or job loss. This increases the risk that you might default on your loan in difficult times. As a result, banks may compensate by offering a higher interest rate or tighter loan conditions to offset that uncertainty. |
At Gowago, we don’t discriminate and realise that not everybody has the same financial privileges or past. And that should not have an impact on your future. Hence, the Gowago interest rate is fixed at an affordable 5.9%, regardless of who you are or how high your loan is.
So, in our example, what would a loan with Gowago look like?
Imagine, you want to finance CHF 25,000 of the total price of your VW Golf. Over 60 months, your monthly payment would be around CHF 483 — this includes both the repayment of the loan (the principal) and the interest. Over the life of the loan, your total interest paid would come to roughly CHF 3,980. That’s the price you pay for flexibility and ownership. But! The cost of the interest is tax-deductible in Switzerland!
What’s a massive advantage for those who need to drive a lot: Because you fully own the car, you’re not limited by kilometre caps, forced repairs, or strict return conditions. Your life, your car, your choice. If your lifestyle changes, you can sell the car anytime or pay off the credit early without penalties. It’s your car, your terms.
Depreciation is a central concept to find out whether your car credit makes sense. Cars, especially new ones, naturally lose value when they are used and age. With leasing, you don’t have to worry about this, because you can give the car back at the end of the contract. With a car credit, however, the key factor is long-term ownership.
If you plan to drive your car for 5+ years, the depreciation curve flattens out and the impact on your wallet lessens. Depreciation slows down after the first few years, meaning your cost per kilometre drops steadily the longer you keep the vehicle.
And remember: a more expensive car doesn’t always mean higher monthly payments. The amount you finance, your down payment, and the term length all influence your monthly rate.
Find out how much the car credit for your dream car would be with Gowago. Simply find the car you want, and calculate the monthly payments with our credit calculator. That way, you not only find a match for your lifestyle, but also your budget.
Drive your dream with a car credit
2. Overlooking the Total Cost of Credit
One of the biggest mistakes when financing a car with credit is focusing only on the monthly payment while completely overlooking the total cost of the loan.
Sure, a low monthly rate does feel manageable — even attractive — but it will likely be connected to a long loan term that results in high interest costs, which add up quietly in the background. Let’s say you finance CHF 25,000 over 72 months instead of 48. Your monthly payment drops, but you’ll end up paying thousands more in interest over time. This is especially true for high loan amounts.
"A low monthly rate might seem attractive, but a long term can lead to paying thousands more in interest. Always look at the total repayment amount — not just what you pay each month."
That’s why it’s essential to look beyond the surface. Don’t just ask “Can I afford this each month?” — ask “What will this car cost me in total?” The Gowago credit calculator make this transparent by showing both monthly payments and the full repayment cost, including interest. This way, you stay in control and avoid getting locked into a deal that quietly drains your budget over the years. Being smart about the total cost helps you protect your future finances while still driving the car you love.
3. Ignoring the Importance of the Effective Interest Rate
It’s easy to get caught up in flashy offers that promote a “low interest rate” — but if you’re not looking at the effective interest rate (Effektivzins), you could be missing the real picture.
Think of it as the true cost of borrowing. And the effective interest might also vary widely, even with the same provider. Some credit providers will give out interest rates anywhere from 4% to a whopping 12%. But at Gowago, we keep things simple with a transparent, fixed effective interest rate of 5.9% — no surprises, no tricks. 
"The effective interest rate (Effektivzins) shows the real cost of borrowing, including all hidden fees. It’s the number you should compare — not just the flashy promo rate."
When comparing credit options, always ask for the effective rate to make sure you're comparing apples to apples. It’s the clearest way to protect yourself from unexpected costs and make a truly informed decision.
To find out more about the interest rates for car credits in Switzerland, read our interest rate comparison. Here, we compare the effective interest rates, credit amount ranges, and interest costs of the biggest providers of car credit in Switzerland. That way you can find the best deal – we’d love you to go with Gowago, of course, however: It is your life and your decisions. After all, we believe in giving you ultimate freedom, in all aspects.
Compare the Car Credit Interest Rates in Switzerland
## 4. Not Knowing your Creditworthiness Unlike in the U.S., where your credit score is linked to your social security number and follows you like a shadow, Switzerland doesn’t have one universal credit score. But that doesn’t mean lenders hand out credit without checking — quite the opposite. Banks and platforms like Gowago rely on data from **agencies like CRIF and ZEK**, as well as your payment history, to assess whether you’re a reliable borrower. And this has a direct impact on your chances of getting approved for a car credit, as well as the amount you can borrow.
> **"Your payment history, residence status, and other personal data affect your chances of approval and the conditions you receive. Check your credit standing with CRIF or ZEK before applying to avoid surprises."**
One of the most important factors? Whether you’re a good payer. If you have open Betreibungen (debt collection cases), your credit application will likely be rejected — it’s a sign that your expenses may already exceed your income. But what many people overlook is that even small things can lower your credit standing: like frequently changing addresses in a short period of time, or an unpaid mobile bill from years ago that slipped through the cracks.
To avoid surprises, it’s smart to be proactive. You can order a private credit check from CRIF, which gives you insights into your score and personalised tips on how to improve it. This way, you know exactly where you stand before applying — and can confidently choose a credit plan that matches your financial reality.
5. Making too Many Credit Applications
This is linked to knowing your creditworthiness. There is a big “but” to you checking out your credit worthiness.
In Switzerland, every official credit request leaves a trace — and too many in a short period can work against you. While checking your credit score privately through agencies like CRIF is safe and mostly doesn't impact your standing, submitting multiple loan or leasing applications to banks or credit providers within a short timeframe can raise red flags.
"Every formal loan application is logged and can harm your credit score if done too frequently. Use simulation tools first — then submit just one strong, well-prepared request."
Why? Because it signals to lenders that you may be desperately seeking credit or struggling to get approved — even if that’s not the case. Each formal credit request, especially if it’s rejected or remains open, gets logged in the ZEK (Zentralstelle für Kreditinformation) database.
When another lender sees several recent applications, they might assume you’re overextending financially or being turned down elsewhere. That could reduce your chances of approval — or lead to worse terms, higher interest rates, or stricter requirements.
So, what’s the smarter move? Do your research first. Use credit calculators like Gowago’s to simulate offers without triggering any credit inquiries. Once you’ve found the option that fits your budget and lifestyle, submit just one well-prepared application. This shows you’re confident, well-informed, and financially stable — the kind of borrower banks love.
Tip: Use simulation tools for comparisons, not multiple real applications. Your credit history will thank you — and so will your future self.
6. Choosing a Loan Term That’s Too Long
At first glance, a longer loan term can seem like the perfect solution — lower monthly payments, more breathing room in your budget. But stretch that loan too far, and the hidden costs start piling up. The longer the duration of your car credit, the more interest you’ll pay in total, even if the monthly rate feels manageable. For example, financing CHF 25,000 over 72 months instead of 48 might lower your monthly payment by a few hundred francs, but it could also add over CHF 1,500 in extra interest by the end of the contract.
But there’s another risk: negative equity. Cars lose value over time, especially in the first few years. If your loan term is too long, you might still owe more than the car is worth — especially if you decide to sell early or trade it in. That’s not just financially inconvenient, it can make your next car purchase more difficult.
"Long terms reduce your monthly payment but increase your total interest and risk of owing more than the car is worth. A balanced term (e.g. 48–60 months) often saves more in the long run."
At Gowago, we recommend finding a balance. A loan term of 48–60 months is often the sweet spot: it keeps monthly payments realistic while keeping interest costs in check. The goal isn’t just to drive today — it’s to stay in control tomorrow, too.
That said, there are scenarios where a longer term can be a smart, strategic move. If you already know that you’ll receive a bonus, inheritance, or other lump sum soon — and plan to pay off the loan early — then choosing a lower monthly rate now helps ease your monthly budget in the short term. At Gowago, early repayment is always possible, so you stay flexible and in control of your finances, without being locked into high monthly commitments.
Stretch your legs on the road, not your loan. A smart term means more freedom, less cost, and a better long-term ride.
Check out the options that Gowago offers. They fit every budget and every need – and if you are unsure, our excellent advisors will gladly help you find the right configuration for your life.
## 7. Selling the Car Too Early
With a car credit, you’re the legal owner of the vehicle from day one — which gives you the freedom to sell it whenever you want. Sounds great, right? But here’s the catch: selling the car too early, especially within the first 2–3 years if it's a new car, can be a financially painful move. Why? Because cars lose value fastest in those early years — often up to 50% of their original value within the first 36 months. If you sell during that steep depreciation curve, you may end up with a car that’s worth less than your remaining loan, and you’ll need to cover the difference out of pocket.
"Cars lose value fastest in the first few years, so selling early often means losing money or staying stuck with leftover debt. A car credit works best when you keep the car for at least 4–5 years."
This is especially true for new cars, which depreciate the moment you drive them off the lot. Even if you manage to find a buyer, the selling price might not be enough to pay off your remaining credit — leaving you with no car and leftover debt.
If you already know that you’ll likely want a different car in just a few years, then a leasing contract might be the better fit, since it’s designed around shorter usage periods and avoids resale stress. But if you’re going the credit route, plan to hold onto the car for at least 4–5 years. That’s when depreciation begins to flatten out, and you start getting real value from your investment.
Pro tip: The longer you drive your car, the more each kilometre “costs” you less. Short-term flips may feel spontaneous — but they often come with a price tag.
8. Overcommitting Financially
You might be super excited to finally get your dream car – financing with a car credit can grant you access to a car that might feel just out of reach, and bridge the gap between your current savings and your four-wheeled aspirations. However, you always, always, always need to remain financially responsible.
"If your monthly budget is too tight, unexpected costs like repairs or insurance can cause stress or debt. Always include running costs and financial buffers in your planning."
### Don’t overestimate your budget
One of the most common mistakes people make when financing a car is biting off more than they can chew. A shiny new car, low interest, manageable monthly payments — it’s tempting to stretch your budget just a little more to get the car you really want. But financial freedom starts with honesty.
If your car credit eats up too much of your monthly income, you leave yourself with little room for flexibility — and that can become stressful fast. Maybe it’s fine now, but what if an unexpected bill comes up, or your income changes? Before signing anything, ask yourself: Will this loan still feel comfortable in six months? Your car should support your lifestyle, not control it.
Forgetting the car’s running costs
Even if your monthly car credit fits your budget, the day-to-day costs of owning a car can catch you off guard. Fuel or electricity, insurance, servicing, tire changes, parking, tolls, taxes — it all adds up. And depending on the car, these costs can easily double your monthly outlay.
It’s easy to forget these when you're focused on the credit rate or term, but they’re just as real. Choosing a car that fits your budget means factoring in the whole picture. At Gowago, we always encourage you to calculate the true cost of ownership, not just the loan. Because the goal isn’t just to get the car — it’s to keep driving it with peace of mind.
Getting a cool car – that’s unreliable
Financing a car with credit means you own it from the beginning — and that ownership comes with full responsibility. If the car breaks down, you’re not only paying for the repairs, you’re still paying off the loan. That’s why getting an unreliable vehicle — whether it’s known for mechanical issues, missing service records, or hidden damage — can turn into an expensive mistake fast.
It might be a great deal on paper, but if it spends more time in the garage than on the road, it’s not really a bargain. Do your homework: check reviews, inspect the service history, and when in doubt, go for a model with a strong reputation for reliability. Because a credit-financed car should get you where you want to go — not leave you stranded.
9. Not Deducting the Credit from your Taxes
Many people don’t realise that car credit comes with a hidden bonus: in Switzerland, the interest you pay on your car loan is tax-deductible. That means every year, you can deduct the annual interest cost from your taxable income — reducing your tax bill and putting money back in your pocket. Yet, this benefit is often overlooked or misunderstood. Some assume the full loan amount is deductible (it’s not), while others forget to claim it entirely.
"In Switzerland, the interest on your car credit is tax-deductible — but many forget to claim it. Don’t miss out: that deduction can save you hundreds every year."
Let’s say you pay CHF 1,300 in interest in a given year. Depending on your tax rate, that could translate to over CHF 100 in savings — just by submitting the interest certificate your lender sends you at the end of the year. At Gowago, we make this easy by providing a clear breakdown of your annual interest costs, so you’re ready when tax season comes.
It’s your money — don’t leave it on the table. Deducting your credit interest is one of the easiest ways to make your car financing even smarter.
## 10. Confusing Leasing with Credit
Leasing and credit might both get you behind the wheel, but they’re very different financial tools — and mixing them up can lead to the wrong decision. With leasing, you’re essentially renting the car long-term. You pay for its usage, not ownership. That means mileage limits, stricter insurance requirements, and the car must be returned in good condition — or you’ll face extra charges. At the end of the lease, the car goes back to the provider.
With a car credit, on the other hand, you’re buying the car and paying it off in monthly instalments. The car is yours from day one. You can drive as far as you want, personalize it, choose your own insurance, and sell it whenever you please. There's no need to return it at the end of the term — it’s your asset.
"Leasing means temporary use with conditions; credit means full ownership and flexibility. Know the difference so you can choose the option that best matches your goals."
Choosing the wrong option based on assumptions — like picking a lease thinking it’s cheaper, or choosing credit without planning for long-term ownership — can cause frustration and unexpected costs. That’s why it’s so important to understand the real difference. Gowago offers both options, so you can compare them side-by-side and choose what fits your lifestyle, budget, and long-term plans best.
Own it or lease it — the key is knowing what you’re signing up for. Understanding the difference means choosing the freedom that’s right for you.
Find out the differences between leasing and car credit
### Conclusion Taking out a car credit is more than just signing a contract and getting the keys — it’s a financial commitment that should empower you, not limit you. By understanding how car credit works, knowing your creditworthiness, and being aware of common pitfalls like choosing the wrong loan term or underestimating total costs, you give yourself the best chance to drive confidently and stay in control.
Whether it’s avoiding unnecessary interest, choosing a reliable car, or making sure you deduct your credit from your taxes — every smart choice adds up. At Gowago, we believe that financing your car should be simple, transparent, and tailored to your life — not a guessing game filled with hidden conditions.
So take your time, do the math, ask the questions, and don’t settle for anything that doesn’t feel right. With the right knowledge and the right partner, your car credit becomes a tool for freedom, not a financial burden.
You're not just choosing a car — you're choosing how you want to move through life. Let’s make it a ride worth taking.
Gowago. Move on.
Find your next car – with a Gowago Car Credit
