Buying a car involves selecting the model, the brand, but a more prominent question that lies ahead for the buyer is the finance for the car. The financing options depend on whether you decide to buy a new car or a used car. This choice is crucial as it determines the nature of a loan that one opts for. Determining the purpose of buying the car helps the buyer make better decisions whether to opt for a new car or to settle for a used car. Different rates of interest are available for a new and used car loan.
Let us understand the benefits of availing a new car loan vis-a-vis used car loan-
New cars right off the factory production lines have zero kilometres on the odometer, and that is why the financial institutions easily finance for such loans, unlike for a used car loan. The financial institutions lend finance up to 90% of the cost of the vehicle while maintaining a lower rate of interest for such cars. Many lenders provide finance schemes for the ‘on-road’ price of the vehicles too. Tenures for such loans range between five to seven years that makes it easy for the borrowers to repay. The interest rate on such loans is in the 9% range. Also, newer variants of cars have higher fuel efficiency and lower emissions, leaving a lesser carbon footprint.
While you purchase a new car, you need to keep in mind other factors that might effectively increase the cost of managing your car like your insurance premiums. Also, high-end luxury cars have a higher maintenance cost making it an overall expensive affair.
Now moving towards a used car, the cost of such cars are lower than new cars reducing the insurance premiums. Also, the loan amount as required by the borrowers is lower, thereby allowing the borrowers flexibility in repayment tenures. Most used car finance facilities are available for the tenure of up to five years. Lenders even provide loans for cars whose age is up to ten years. Moreover, the repayment facilities are tailor-made to suit each borrower separately.
Used car loan eligibility is similar to other loans. A person with at least 21 years of age can avail such facility of a used car loan. The income requirements differ according to the amount of finance obtained, model and make of vehicle, and repayment tenure. There are no restrictions for partnership entities and private organisations in availing such used car finance facilities.
Careful consideration of your needs and preference will help you decide between buying a new car or a second hand car which shall determine the finance opted. Get the best interest rate by selecting the best finance option for you.