When purchasing a car, most buyers choose an auto loan from a lender who has a partnership with the dealer. It is convenient for the car owner because the dealer provides all services in one location, and they do not have to chase down banks for them. However, lenders may charge you a higher interest rate if you take a loan from the showroom because they must pay a commission to the dealer.
Do speak with and negotiate an auto loan with lenders who have a representative at the dealership. Compare the quoted rates online, however.
If the interest rates differ, the dealer may try to sweeten the deal by offering a discount on the car’s value. When shopping for a car loan, don’t just compare interest rates. Determine the total interest expense. You can easily do it online through a variety of intermediary websites. Choose a loan with the lowest actual interest outlay.
Lenders commonly use two techniques to confuse borrowers. First, determine whether the loan is based on the ‘ex-showroom or ‘on-road’ price. This will have an impact on the amount of loan you can obtain.
The lender may occasionally request that you pay one EMI (equated monthly instalment) in advance. This is how it works. The lender may approve a 5 lakh loan with an EMI of, say, 12,000. Instead of giving you the entire car loan amount, the lender will provide you with 4.88 lakh and charge you one upfront EMI. Be cautious of such practices.
The interest rate and the length of the loan are not the only two factors to consider. Examine the processing fee and other charges, such as those levied by the lender on prepayment, foreclosure, and documentation.
A car is an asset whose value declines with time. Taking out a larger loan may not be the best option. Make every effort to obtain a loan with a shorter repayment period—the lower the interest outgo, the shorter the tenure.