Ever rising prices of brand new cars and overhauled pre-owned cars market has compelled many car buyers to opt for used cars to fulfil the dream of owning a car. The pre-owned car’s market has evolved manifold over the past decade and is considered at par with brand new car market. This is so because, despite the model and brand of the car, depreciation of a new car is almost 10%-20% in the first year itself, whereas a second-hand car has already past the maximum depreciation stage and hence you will have to pay a lesser price for even a premium model. In addition, new age car owners prefer to upgrade their metal beauties every few years resulting in a huge influx of sparsely used pre-owned cars. This trend brings your dream car steps closer to an affordable range while retaining the newness of the car. Despite the drop in cost, the price still runs into few lakhs, thereby making you opt for a car loan.
The overhaul of pre-owned cars market has led banks and non-banking finance companies to provide car loans for both new and used cars. Though the key components such as eligibility criterions, the rate of interest, and loan tenure remain same, slight variations are seen between a used car loan and new car loan pertaining to each individual factor. For instance, the rate of interest is slightly higher for a used car loan as compared to an anew car loan. There is one group of car buyers who prefer to do direct cash transaction for their purchase whereas there is another set of car buyers who would prefer to take a loan. Both the groups have their own advantages and disadvantages but below are some aspects that suggest how availing a used car loan can be beneficial:
1. Lessens the burden of arranging and shelling out a huge sum of money –
Though the price of a pre-owned car is lesser than that of a brand new car, yet the cost remains well within the range of lakhs. For example, the price of a brand new Honda City may be Rs. 12-lakh. But, after being labelled as a used car and with depreciation, its price could drop to Rs. 9-lakh. Here, the reduced cost is still a huge sum of money and hence, the burden of paying upfront by cash is much more compared to buying the car with a loan.
2. Easy installments –
A used car loan provides the ease of equally dividing the loan amount to be paid on a monthly basis, thereby making it more affordable.
3. Tenure of repayment –
Generally, lenders provide repayment tenure of one to five years, but some lenders also offer loan repayment tenure of up to seven years. So, depending upon your monthly repayment capability, you can either choose longer tenure with lesser EMI or shorter tenure with higher EMI.
4. Purchase popular models –
It has been observed that popular models car makes for a better deal in terms of lesser interest rates, processing fees, down payments and other miscellaneous charges, as compared to rare or offbeat models. Thus, making it easier for you to own the most popular model of car.
5. Different types of loans and flexible rate of interest –
Generally, there are four different types of used car loan – secured loan, unsecured loan, pre-computed loan, and simple interest loan. Also, interest rates differ from lender to lender. So, as a borrower, assess your repayment capacity and do a thorough market research on available interest rates before signing off loan papers.
With so many advantages of a used car loan, it is wiser to opt for financial assistance over total cash payment to own a car without getting burdened!