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Buy a car in Portugal: what foreigners should know before taking a car loan.
Searching for buy a car in Portugal is a common step for many foreigners who have just arrived in the country. Whether you’re an expat, a digital nomad or a newly relocated resident, having a car often means more freedom, easier mobility and less dependence on public transport, especially outside major cities.
However, buying and financing a car in Portugal is not always straightforward for non-Portuguese residents. Before moving forward, it’s important to understand how a car loan in Portugal works, what banks require from foreign applicants, how long the process can take and which costs are not included in the financing.
How buying a car in Portugal usually works?
In Portugal, cars are typically purchased either through full payment or with a car loan provided by a bank or financial institution. For long-term residents with a Portuguese financial history, this process can be manageable. For newcomers, it often comes with extra challenges.
The process starts with a credit assessment, where banks analyse income, tax residency, employment contracts and financial history. This is where many newly arrived residents face difficulties.
Car loan: common challenges for foreigners.
Applying for a car loan in Portugal as a foreigner often comes with extra requirements and limitations, such as:
- No Portuguese banking or credit history.
- Short residence period in Portugal.
- Higher interest rates compared to local applicants.
- Requests for a guarantor.
- Longer approval times.
- Preference for Portuguese employment contracts.
Even financially stable foreigners may struggle to meet all bank requirements, especially during their first months in the country.
Interest rates: understanding TAN and TAEG.
When considering a car loan in Portugal, it’s essential to understand the difference between two key concepts:
- TAN (Annual Nominal Rate): covers only the interest charged on the loan.
- TAEG (Annual Percentage Rate): includes interest and all associated costs, such as administrative fees, mandatory insurance and commissions.
Loan duration, down payments and ownership.
Longer loan periods can reduce monthly payments, but they significantly increase the total amount paid over time. It’s not uncommon for car loans in Portugal to extend over 8 or even 10 years.
In many cases, banks also require:
- A down payment, meaning you must pay part of the car’s value upfront.
- Retention of ownership, where the car legally belongs to the bank until the loan is fully repaid.
This can limit flexibility, especially if you plan to change vehicles or leave the country.
Costs not included in a car loan.
Another important point to consider when you buy a car in Portugal through financing is that a loan does not cover everyday car expenses, such as:
- Maintenance and servicing.
- Road tax (IUC).
- Car insurance.
- Unexpected repairs.
- Tyre replacement.
This means the monthly loan payment is only part of the total expense.
Documents required to apply for a car loan in Portugal.
If you plan to buy a car in Portugal using a traditional bank loan, it’s important to prepare all the required documentation in advance. Portuguese banks are quite strict, and missing documents can significantly delay or even block the approval process, especially for foreigners.
In most cases, banks will ask for the following documents:
- Valid ID (passport or Portuguese residence card).
- Portuguese tax number (NIF).
- Proof of income, such as:
- Last three payslips (for employed workers).
- Latest tax return (for self-employed workers or freelancers).
- Pension statement (for retirees).
- Proof of address, such as a utility bill (water, electricity, gas, internet or TV). Certificates issued by local parish councils are usually not accepted.
- Proof of IBAN or bank account.
- Pro forma invoice for the vehicle, issued by the seller (only required if the car loan is approved).
These documents allow banks to assess your personal, professional and financial situation before approving a car loan in Portugal.
Buy a car in Portugal without a car loan?
For expats and newcomers, the documentation process is often one of the biggest obstacles to getting a car loan. Without Portuguese tax records, local payslips or long-term residency, banks may request additional guarantees or simply reject the application.
The complexity of the traditional process raises an important question: Is it possible to have a car in Portugal without taking a car loan?
The answer is yes. That’s where car subscription or long-term rental solutions become especially relevant.
Car subscription: a simple alternative for foreigners.
For foreigners who want to drive in Portugal without dealing with credit, banks or long-term commitments, car subscription and long-term rental solutions are becoming increasingly popular.
Unlike a car loan in Portugal, a car subscription:
- Does not require credit approval.
- Does not increase personal debt.
- Does not require a down payment.
- Does not involve long-term commitments.
With a subscription model, such as the one offered by Xtracars, you simply choose a car, select the duration (from 1 to 12 months) and pay a fixed monthly fee.
Why subscriptions work so well for expats and newcomers?
Car subscription solutions, such as those offered by Xtracars, are especially well suited for people who are still settling into life in Portugal. The monthly fee typically includes:
- Maintenance and servicing.
- Roadside assistance.
- Insurance.
- Tyre replacement.
- Replacement vehicle, if needed.
There is no down payment, no ownership retention and no exposure to vehicle depreciation. With Xtracars, the entire process is digital, simple and designed to remove bureaucracy, making it an ideal solution for expats, digital nomads and international residents.
Making the car feel like your own.
A common misconception is that subscription means giving up personalisation. In reality, modern subscription models allow you to tailor the experience to your lifestyle, making the car feel "more yours”.
With Xtracars, users can choose from a diverse fleet of vehicles, adjust subscription duration and mileage, add complementary services, such as child seats, and select packages that prioritise comfort or peace of mind.
The result is a car adapted to your real needs, with the convenience of ownership, but without its financial and bureaucratic burden.
Buy a car in Portugal: choose the solution that fits your life.
A car loan in Portugal can be a valid option for those with stable residency, long-term plans and a solid financial history in the country. But it’s not the only way to drive.
However, for expats, digital nomads and newly arrived residents, a car subscription or long-term rental often offers a faster, simpler and more flexible way to get on the road.
With Xtracars, you can immediately access a car in excellent condition, without navigating complex banking processes, allowing you to focus on settling into Portugal, not paperwork.
