Nowadays, Car has become a necessity of life. Every individual wish to have one but financial constraints stop them from doing so. A recent study showed that in a New Vs Used Car Loan in India, more people prefer to take the used cars.
As the new and luxurious cars come with a high price tag, many people cannot afford such luxury of having an extravagant car. In such cases, people prefer buying a used car with the help of a used car loan.
There are many merits and demerits associated with New Vs Used Car Loan in India that a buyer should consider while availing a car loan:
New Car Loan
Purchasing another vehicle is less troublesome when contrasted with a used car loan. These vehicles accompany a significantly high price. So, there is a need for an enormous add up to spend on the car.
Anyway, with every one of these advantages, the new vehicle costs significantly more and has a higher rate of depreciation right from the second it is driven out of the showroom. The insurance premium is naturally higher in a new car.
The loan amount offered in a new car loan is about 90% of the expense of the car. There are not many banks that offer loans up to the on-road price of the car which reduces the burden on the buyer.
The repayment tenure of the new car loan is commonly 5 to 7 years, which gets the EMIs to an affordable range. But it is essential to note that the New Car Loans Interest Rate is much lower, commonly around 10-11%.
Used Car Loan
The cost of a used car is much lesser as compared to a new one which signifies that depreciation rate is lesser, and the insurance premium is also low. But the downside to it is that previous records of history and vehicle failure cannot be completely tracked. There might be a high chance of maintenance issues in a used car which may require extra expenditure.
While the total amount borrowed in a used car loan will be much lower than a new car loan there are a few issues that might 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 the 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 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.
Leading Car Loan Providers: