Purchasing a four-wheeler is
no more challenging. Once considered a luxury asset, now has become more of a
necessity. It has become a secure mode of transport, giving the owners to take
their family members out or head for a solo drive. The dilemma that consumers
fall into is whether to purchase a used car or a new one?
Many believe buying a new
four-wheeler is not a great financial decision. Some others believe that going
for a trusted second-hand vehicle is better when you get your first
four-wheeler. A new car too can deliver superior performance if you are willing
to spend more. Depending on the final decision, you need to apply for car loans.
How do pre-owned
or new four-wheeler loans work?
There are primarily four
parameters that set used and new auto loans apart. They are –
Amount: When it comes to a new vehicle loan, there are very
few unknown factors from the owner’s perspective. Considering it is a new one,
the performance and quality is not a concern. It has zero miles per kilometres on
the odometer. However, when it comes to pre-owned vehicles, the banks and other
financial institutes give away the loan taking into various factors, including the
car condition. The loan-to-value ratio is lower for used cars. Some lenders
extend up to 95 per cent loan on the car value. If you successfully meet the
eligibility criteria, lenders may provide up to INR 1 lakh to INR 50 lakh.
Tenure: Another critical area for the borrowers is the loan
duration. Everyone wants to spread out the loan for as many years as possible so
that EMIs are manageable. While the tenures are usually longer for new loans, it
is not the case with the used ones. Nowadays, institutes providing pre-owned
vehicle loans are also giving it away for lengthy period, i.e. 60 months to 5
years.
Interest rates: New vehicle carry lower risks; hence, the car loan interest rate is low too. In the case of pre-owned vehicle, the prices
are typically high. However, remember higher loan interest rates makes sure you
repay the loan ahead of the maturity phase. Although the interest rates are
higher for used cars, the paperwork is minimal, and the application process is
quick. This is a massive relief for consumers.
Used car loan interest rate
also includes other factors like the age and type of the vehicle. This could
either increase or decrease the rates.
EMI options: If you opt for a tailor-made car loan, it can be
beneficial for you in many ways. While one may have heard of new car loan EMI
options, the second-hand car loan options are not behind. Flexible EMI options
are aplenty in under pre-owned loans. You have the choice between structured
and fixed EMIs. Under the fixed EMI, the instalment remains the same for the
entire period. But in structured EMIs, you can repay more amount whenever your
income rises such as incentives, bonus, etc. You can do so at regular
intervals. You can use the EMI calculator to make the right choice.
Purchasing a four-wheeler
involves commitment owing to the running and maintenance costs. If you do not
want to splurge much and are find with a reasonable performing vehicle, then
opt for second-hand car loans.
