Points To Keep in Mind Before Taking a Loan For Purchasing Used Car

As incomes and aspirations grow, Indians are drawn towards purchasing cars. A new car could be a first time purchase for several families or an upgrade from an existing one. However, Indian buyers have always been value-conscious. Hence, used cars are rising in popularity and are being seen as a viable option as compared to a new car. The New Car Market has also seen a reduction in growth, significantly dropping and hardly growing even a bit year by year, whereas the Used Car market is seen to be growing at 15-18% a year. In the previous year, new cars closed at 3.3 million in sales whereas the used car market has sold not less than 4 million pieces. Earlier sales of the used car market were lower than the new car segment, but in FY 2018 it was 1.3 times the new car market, aptly showing that the common people have started to prefer Used Cars over New Cars.

A used car can be a cheaper alternative to a new one. In fact, there are dealerships which specialize in selling used cars. They manage documentation and ensure that a used car looks and feels almost like a new one. Therefore, prospective buyers only need to worry about funds

The Funds

Ideally, one would have to save for a few years even for a Used Car, but in the modern day the best option for a person to buy a used car can be a ‘Used Car Loan’. Just like loans for New Cars, financial Institutions also provide the option of Used Car Loans for Used Cars Market.

Points to keep in mind

Over the last few years, there has been a rise of 12-18% in used cars loans This indicates two things: Lenders have made it easier to avail of used car finance and borrowers are comfortable approaching organised lenders. To avail of a Used Car loan, one must be aware of certain factors and formalities for smooth functioning during the loan-taking process and paperwork filing process.

Proper Documentation

The borrower should make sure that the car has all the proper documents intact. The RC of the car should be clear(implying that the borrower should verify that the car is not stolen)

Quality of the car

The borrower should be aware of the fact that the value of a used car depends on its present quality and the overall usage of the car. The price of a used car depends on many factors such as the amount of time it was owned by the previous owner, its fuel type, the distance it has covered, etc. Thus a borrower should be careful so as to not overpay for the car.

In most cases, Financial Institutions do not provide loans for cars that are older than 10 years. They may be available from an independent loaner, but dealing with them can prove to be risky.

Interest Rates

The Interest Rates of used cars tend to be higher than the new car loans, they can range from 10-17 per cent.

Making a Bigger Down Payment

The borrower should make it a point to make a big down payment. As used car interest loan as high, big down payments can go a long way in decreasing the EMI amount the borrower would have to pay and also decreasing the total amount paid by the borrower for the car

Choosing the right Tenure

The loans in the Used Cars Segment usually have a maximum tenure of 5 years, although some lenders also offer tenure of up to 7 years. The borrower should try to keep the tenure as low as possible so as to reduce the amount of interest paid by him/her as the interest rate is on the higher side for used cars.

Credit Score

A healthy credit score might enable the borrower to enjoy attractive interest rates.

Choosing a credible lender

The borrower should be careful in choosing the lender of his/her choice. Choosing the right lender may go a long way as they can provide reduced interest rates as compared to others.

If a prospective buyer keeps these points in mind, it would be easier to avail of a used car loan.