In India, owning a personal transportation vehicle – a cycle, a motorcycle or a car – is an aspiration that is paramount in people. There is a periodic scaling up of this aspiration culminating in the desired objective of owning a car. In order to help people to own a car, many financial institutions such as banks and NBFCs such as Tata Capital offer new car loans and even used car loans.
Before jumping in to avail a used car loan we suggest that you carefully evaluate all your options and then go about availing a used car loan. To help you make a sound decision, we present the following used car loan guide.
Set a budget
The first thing that you do is to set a budget based on your ability to repay the loan. Setting a budget helps you to know exactly how much down payment you have to make, how much you can repay and therefore the loan amount you have to take.
Know your credit score
Remember that lenders check your credit score before they extend loans to you. The credit score tells the lender your creditworthiness based on CIBIL Score. If your score is above 750, you’re your credit rating is high and you can negotiate good terms. If your credit score is less than 750, then the lender sets more stringent terms especially in regard to interest rate, which will make your loan costlier to avail.
Therefore, ensure your credit score is high by being prompt in paying EMIs of any other loans you may have taken. Sometimes, it may make more sense to get your score up to 750 before applying for a used car loan.
Examine used car loan terms from different lenders
Each lender has different policies on used car loans. You must examine several lenders and evaluate their offers and then make a considered decision. This evaluation will help you to get a good car at optimal terms.
Short tenure or long tenure
It is always better to take a used car loan for shorter tenure as you will pay much lesser amount of interest than if you were to take a longer tenured loan. If you can afford it, go for the short tenure loan even though the EMI is higher.
Choose the used car within the budget
The used car market has undergone a sea change with major automakers offering pre-owned cars to cater to used car customers. They do up the car before presenting it to you. They also offer a good price and other benefits. Some of the lenders such as Tata Capital have also tied up with automakers to offer seamless used car purchase process. It makes sense to examine the used car offers from different automakers. Often, you will get a good used car of a brand that does not have good resale value. Typically, the resale value is low for the first resale. You can benefits from such cars both in terms of performance and price.
Choose a local dealer if you have good rapport with the dealer
If you have a past relationship with a used car dealer and your experience has been good, then it may help you to examine the dealer’s offer and compare it with the automakers’ pre-owned car offers. It is possible that the dealer may have a bank of good quality used cars.
Check the documents
It is always good to check the documents thoroughly before purchase. On scrutiny of documents, you can track its history if it has changed hands. Open the bonnet and check the engine number and chassis number and compare it with the information on the documents. You can also verify if there is extended warranty. Check service records. Check for insurance status.
Check the vehicle
Give the vehicle a thorough look over to rule out damage due to accidents. You can ascertain this by looking at the paint condition, usage characteristics, tire wear and tear, test drive, noise, vibrations and driving comfort. Check all the parameters such as lights, door locks, indicators, instrument cluster and interior. Check for a spare tire, boot space, tools and chassis.
Based on the above guideline you can proceed to plan your used car purchase with an appropriate second hand car loan from a reputable lender such as Tata Capital.