Buying A Used Car? How To Get The Right Loan

Used cars are becoming quite popular in India. In fact, India has the third-largest market for used cars in the world. In FY 2019, more used cars were sold in India than new cars. For the first time, sales of used cars crossed the 4 million mark in the first fiscal. The used car market has touched a mammoth size of Rs 1.4 crore as compared to Rs 2.2 lakh crore market size of the new car market. This is despite margins being healthier in the case of the new car market. Leading analysts believe that for every 2 new cars sold, 3 used cars would be sold. This is comparable to leading economies such as Germany, Brazil and the United Kingdom.

Some of the factors that are driving used car sales include easier availability of finance, significant cost savings, rise in the number of credible distributors/resellers of used cars, fluctuations in fuel prices and increase in vehicle insurance rates.

Most individuals rely on used cars loan to fund their purchase. Here are some tips on how to get the right loan:

Be Ready with Documents

Irrespective of whichever lender you finalize, you will need to provide certain documents to fulfil KYC norms. You would also have to provide proof of income. Therefore it is a good idea to keep hard and soft copies of necessary documents ready. You can get a comprehensive list of all documents required by either calling up the bank or over the internet.

Evaluating Interest Rates

The first step to exploring used car loans is to evaluate the second-hand car loan interest rates offered by different lenders. One can either rely on the internet or even visit the branch personally to figure out the used car interest rates. You may not want to depend on only your existing relationship with a lender and instead explore various options.

Consider All Outgoings

Apart from calculating the estimated EMI, you may also have to consider other costs. Some of these include processing fee, administrative costs and insurance premium. Also, understand that your vehicle will incur additional costs of maintenance and fuel. It would be prudent to provision for all these expenses in advance.

Avoid Going Overboard

There are a plethora of options in the used car market. Right from peppy hatchbacks to luxurious sedans to powerful SUVs. Therefore one may be tempted to go overboard and avail of a larger loan amount to buy a bigger vehicle. However, this could upset your finances and put you under needless pressure. If you are already servicing other EMIs, a simple rule to follow while finalizing your car EMI is that the sum of your annual EMIs should not be more than 40% of your annual income. If you aren’t servicing any other EMI, then you shouldn’t be spending more than 10% of your income on a car EMI.

By following these steps, you would be able to wrangle out a favourable deal for yourself.