What you need to know about used car loans and how to get it ?
Statistics show that the used car market in India crossed the Rs.1 lakh crore mark in 2018-2019. In 2017-2018, the used car segment saw sales of 3.6 million units whereas the new car category was at 3.2 million units. Entry level cars are the most popular in this category which accounts for 60% of the total volume of used car sales. With leading car manufacturers also getting into the used car segment with specialized showrooms and dealership loans, there could not be a better time for Indian consumers planning to buy a second-hand car.
There are many factors that contribute to the appeal of a second-hand car. One such factor is the value-for-money price point. New cars depreciate at a value of 30% after just one year, with each passing year resulting in a depreciation of 5% to 10%. This is a good thing for buyers of second-hand cars who can get a car that is just two years old at just 60% of the value of the latest model of the same car. With people having an aspirational lifestyle and rising income levels, there is a large segment that keeps changing their cars in one to two years. This leads to a greater influx of second-hand cars in the market of even the latest models and leading brands within 1-2 years of their launch or purchase. That means if you can’t afford a certain car right now, if you have the patience to wait for just a year or two, you could definitely make it yours at just 60% of its current market value. This is a bargain indeed.
The other advantages of a second-hand car that bring down prices considerably are that they do not come with the hefty charges that add up to the price of a new car, such as state MCD charges, road tax, insurance charges, loading charges, etc.
With leading car manufacturers foraying into the second-hand market with specialized showrooms and loans for these cars, they are also offering some of the same benefits that owners of new cars get. These range from warranties to exchange offers and even free service for a certain period.
Even if you don’t have the whole amount upfront to buy the second-hand car of your choice, you don’t have to worry as you can easily get a second-hand or used-car loan from any of the leading banks in India or from an NBFC (non-banking financial company).
People who are in the market for car loans often get confused whether to choose a car loan or a personal loan. So here is what you need to know to help you decide:
- How much financing you need: Most car loans do not offer 100% financing, which means you will have to make a down-payment out of your own pocket or pay the balance amount out of your own funds. Usually, in a used car loan, a survey is done of the vehicle and a valuation amount is fixed by the officer. This is usually anywhere from 70% to 80% of the value of the car. For example, a used car is being offered to you at a price of Rs.6 lakh but the valuation set by the lender is Rs.5 lakh. This means the loan amount that you finally get in your hands would be between Rs.3.5 lakh and Rs.4 lakh. You would have to put in the remaining Rs.1.5 lakh to Rs. 1 lakh out of your own pocket. If you have this balance amount ready, you could go in for a used car loan. Otherwise, if you are looking for 100% finance, then a personal loan would be better. However, there are certain banks that do offer 100% finance for used cars also, which would depend on factors on their discretion (eg., for long-standing customers or those with a good credit score, etc.). It would be worth your time to research the banks that offer 100% financing in used car loans as well before deciding which one you want to go for.
- A convenient repayment tenure: Most used car loans are not offered for cars that are older than 5 years. So, if you are okay with a 5-year tenure, going for a used car loan is convenient. But if you want to buy an older car, then a personal loan may be handy.
- Interest rates: Interest rates are always lower for secured loans when compared to unsecured loans. A used car loan is always a secured loan because the car is taken as the collateral. Personal loans, on the other hand, are unsecured, which means you end up paying a higher rate of interest. This is an important thing to keep in mind when deciding about your used car loan.
How to get a used car loan
- Decide where to get the loan from:The process of getting a used car loan has now been made easy thanks to the internet, increasing competition among banks, and customer-friendly policies. With most leading banks, you can easily apply online on the bank’s website to avail for the loan. It would be more convenient to apply for a loan in the bank in which you are a longstanding customer or where you have a salary account. If you are buying the used car from an authorized dealership, you could avail the loans being offered by them as well.
- Understand the eligibility criteria: This would vary from place to place. There are different requirements for salaried employees, professionals, self-employed, and agriculturists.
- Discuss the loan details: It is important to have a clear understanding and agreement with the bank regarding your loan details such as the amount you would be paying monthly in EMI (equated monthly instalments), processing fee, tenure, rate of interest, and the loan amount itself.
- Documentation: Make sure you have all the documents and copies that are required. Again, this could vary from bank to bank but would include income proof, address proof, bank statements, proof of identity, IT-returns, etc.
If everything is in order, click here get your used car loan approved in just a few hours or even minutes. Again, if you are a valued customer or longstanding customer of the bank, the process will take even less time. Driving your dream car, even if it is second-hand, is a source of pride which is now made simpler and easier with a used car loan.