In today’s growing economy, Indian automobile sector is one of the fastest growing markets globally. Placed at being the sixth largest, the annual car sales are expected to reach 9 million by 2020, according to a SIAM report.
Buying Used Car
In most cases, people tend to buy a used car, either due to limited budget or to try their hand on a car properly, before going for a bigger car purchase. If the person has a limited budget, it is a given fact that he/she will look for funding options to buy the said used car. A used car loan option is the first financing option that one will look into.
In the case of a used car loan, the loan amount is approved after looking at three important aspects – age, model, and condition of the car. Also, most used car loan lenders, have an upper cap related to the age of the car. For a new car loan, lenders usually give up to 100% of the value of the car as loan amount, however, in the case of used cars, the loan amount sanctioned can be anything between 60-90% of the value of the car.
The used car loan interest rates can range from 15% to 18%. Tata Capital used car loan gives a competitive rate of interest with comparatively lower EMI for the same tenure. However, most reputed used car loan lenders provide a competitive rate of interest, with varying EMI amounts.
As aforementioned, in the case of used car loans, lenders usually finance up to 60-90% of the car’s valuation. The car’s valuation is a tricky pointer. Though a car’s actual valuation will be Rs 5 lakh, after the lender’s valuation study, they might value it at Rs 4 lakh. In this case, the financing company will lend only 80% of Rs 4 lakh, i.e. Rs 3.2 lakh. In this case, the differential amount, Rs. 1.8 lakh will have to be paid by the potential buyer. Also, the initial down payment will have to be paid the potential buyer. In the case of Tata Capital used car loan, the loan amount can be sanctioned up to 90% of car’s valuation with loan repayment period up to 5 years. This will save the potential buyer from the additional amount that has to be paid from his pockets.
The loan duration is another aspect that should be looked into while going for used car funding option. As a direct thumb rule, greater is the loan period, the EMI payment is usually on a lower side. With Tata Capital used car loan options, one can look at choosing from four smart options: Step-up (EMIs keep increasing gradually), Step-down (EMIs keep reducing every year), Bullet payment (allows prepayment in parts, at some periodic intervals) and Ballooning option (lower EMIs with bigger payment in last EMI). With such attractive options, it becomes easy for the potential buyer to adjust their budget according to the smart option that they choose.
Age of Car The other important pointer that is considered while financing a used car, is the age of the said car along with the car model. If the car model’s production has stopped, then it is unlikely to get financing. Also, if the car’s age and loan tenure, put together, is exceeds 5-7 years, then it is less likely to get financing. In this case, the potential buyer must consider buying a pre-owned car that is not older than 4-5 years, so that to get a loan repayment period of at least 2-3 years. However, with Tata Capital car loan option, one can get smarter loan tenure options up to 5 years.