About New Vs Used Car loan in India
Car has become a necessity of life. Every individual wish to have one but financial constraints stop them from doing so. As per the statistics, the number of used car sold in India is more than that of new cars.
As the new and luxurious cars come with a high price tag, and there are many people who can’t afford such branded and extravagant cars. Such people prefer buying a used car with the help of used car loan.
There are many merits and demerits associated with both Type of Loans that one should consider while availing a car loan.
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Considerations in a New Car Loan
Buying a new car is less troublesome as compared to used car loan. These cars come with a high price and therefore, there is a need of a large amount to spend on the car.
However with all these benefits the new car does cost a lot more and has a higher rate of depreciation right from the moment it is driven out of the showroom. The insurance premium is accordingly higher in a new car.
The amount of loan offered in case new car is about 90% of the cost of the vehicle. There are few banks that offer loans up to on the road price of the vehicle that reduces the burden of the customer.
The repayment tenures of the new car loans are typically 5 to 7 years, which gets the EMIs in a tolerable range. But most importantly the new car loans come at a much lower Rate of Interest which is typically around 10-11%.
Considerations in a Used Car Loan
The cost of a used car is much lesser as compared to a new one which means that depreciation is lesser, and insurance cost is also reduced. But the past record of accidents and problems can never be completely verifies, and the associated maintenance problems of the used car is more.
While the total amount borrowed in a used car loan will be much lower than a new car loan there are a few issues which might actually make the loan more difficult to repay. Firstly the financers give only 80% of the value of a used car as a loan. The rate of interest in case of a used car is significantly higher in the range of around 20%.
Thus, the net amount repaid will make this loan costlier in the long run though the amount borrowed may be lesser. Additionally most banks offer only a maximum of 36 months as repayment tenure on used car loans which implies a definitely higher EMI burden on the customer.
It can be safely concluded that while buying a used car may be a smart financial decision but availing a used car loan for the same purpose may not work out to be the cheaper option in the long run.
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