I'm in the process of buying a used car again. This involves taking a loan from the bank because I don't have enough cash on hand. The precise term for the kind of loan I'm taking might be "leasing", but I'm not sure - English is not my first language. In essence, the car is actually sold to the bank and they own it until I've paid off the loan. They allow me to officially use it, subject to a bunch of restrictions.
The whole thing is pretty straightforward, except for one thing which baffles me - the bank requires me to make a large "first payment" for the whole thing.
So, for example, if the car costs 1000€, then the bank requires me to pay them 150€ (15%) as a "first payment" (plus some fees). They then supply the remaining 850€ and pay the car salesman with that.
But, no, wait, it gets even better than that. They don't actually want the 150€ from me. After I've signed all the papers and paid the fees, they simply transfer 850€ to my account and I add the missing 150€ myself and then I get to pay the salesman myself, however we agree (cash, bank transfer, whatever).
Now this thoroughly confuses me. Why all the shenanigans with the "first payment"? What's the difference to them if I take a loan for 1000€ without a first payment, or 1176.47€ with a 15% first payment? In either case they transfer 1000€ my account. This seems completely pointless to me.
Even more - if I did not have the wad of cash, I could just take another loan for 176.47€, then take the bigger loan, and then use it to pay off both the first loan and the car. I know the bank wouldn't be happy about that (because I circumvented their "first payment" scheme), and I have an inkling they might even be able to get me in legal trouble about that, but how? What laws or agreements would I have broken? And why is it so important to them in the first place?
Note about jurisdiction: this is in the EU, Latvia. However I expect that the general principles will be the same worldwide.