When owning a new car seems to be a distant dream because of the high prices associated with it, you can still fulfill your dream of buying a car by investing in a used car. In India buying a car is the second biggest investment made in the lifetime of an individual, the other being buying a house. However, sudden financial responsibilities often creep into the modern lifestyle without giving a knock.
With major auto companies arriving at the market of buying and selling used cars, India has become a huge market for used cars. Many people who are fond of changing cars prefer buying used cars than the new ones as the latter are way too expensive. Buying a used car also saves you from paying taxes which you have to pay otherwise in buying a brand new car like road tax, loading charges, insurance, state MCD charges, and more. And, this may be a valid reason why over 3 million used cars are sold as against 2.2 million new cars, per year in India. Also, there is a sharp depreciation in car prices. For instance, as soon as the car comes out from the showroom, its price decreases by 10 percent. Whatever be the reason, if you are planning to avail a used car loan,
Here 7 points that can help you take an informed decision-
- Personal loan vs. used car loan– Since the amount to be borrowed is comparatively less; people seldom tend to take a personal loan, and not used car loan for buying a used car. Here, the most important factor is comparing their car loan interest rates. Go with the one that offers a lower interest rate. Also, don’t forget to check the processing fees.
- Decide the model and type of the car– Banks and financial institutions will look at the age and condition of the car before approving your loan application. Ensure that the car will meet all your requirements and is pocket – friendly with less maintenance.
- Loan Tenure– The maximum tenure for used car loans is 5 years in most of the banks and other financial institutions. Your lender will approve loans and decide tenure based upon the age and condition of the car. If the car requires a lot of maintenance, the amount sanctioned will be less. Also, you must avoid buying used cars with an age of more than 5 years as lenders can deny giving loan against such asset which requires a lot of maintenance.
- Credit Score– You may be denied a personal loan if you have a bad CIBIL score, but you may be able to enjoy lower interest rates with a used car loan as a car loan is a secured credit.
- Documents Required– Per Tata Capital, the documents required for applying a used car loan include ID proof, address proof, signature verification proof, photograph, ITR/salary slips, Form 16, and bank statement for last three months.
- Choosing the Right Lender– Look for a lender that promises transparent, quick, and simple processing. Customized loans will be an added advantage. And, of course, the most important factor is checking their car loan interest rate.
- Maximum Loan Amount– When you apply for a used car loan, the lender sends its surveyor to evaluate the car. Based on his valuation, the maximum loan amount is limited to 70- 80 percent of the valuation amount. However, Tata Capital offers a loan up to 90 % of the valuation of the car or sale price whichever is lower. The minimum loan amount that Tata Capital offers is INR 1,25,000.