5 MinsAug 4, 2021
Carol D’Costa, 28, is a marketing professional with a leading private sector company. For more than a year now, Carol like many others, has been working from home. But now her company has started asking employees to report to work for a couple of days in a week. Carol is wary of the almost 20km commute to her workplace, especially since she used to travel by public transport. Hence, she is considering buying a car. However, she is not sure whether to buy a new car or a used one. Let us help Carol make the choice.
Factors that Carol should consider include:
- Total Cost of Ownership (TCO)
- Resale Value
- Technology and Features
Total Cost of Ownership
TCO consists of the following factors – the cost of the vehicle, additional expenses like registration and insurance, the interest rate on the car loan and hence the Equated Monthly Installments (EMIs), mileage and maintenance.
Obviously, the cost of a new car will be higher, and it will also come with higher expenses like registration and insurance. This, however, tends to balance out if one factors in the higher mileage that one is likely to get and the lower cost of maintenance, at least for the first few years. Interest rates on new car loans also tend to be significantly lower than Interest rates on used car loans.
The depreciation on new cars is quite steep. A new car is likely to lose almost 30% of its value the moment it is driven out of the showroom. Over the first three years, new cars tend to depreciate by as much as 45-60%. The depreciation rate will depend on the make, model and condition of the car. It is lower for used cars (since most of it has already occurred in the first three years). If Carol chooses to sell her used car after, say, three years, she is likely to recover a higher percentage of her buying price than with a new car.
Technology and features
New cars obviously come with the latest technology and features, including safety features and entertainment systems, among other things. If Carol buys a used car and wants to upgrade her entertainment system, she will have to shell out more money.
Finally, a car reflects the owner’s personality. When buying a new vehicle, Carol will have a choice of colors and features. If she opts for a used car, she may have to compromise on these aspects, maybe even the model.
[Also Read: Tips to Get the Best Car Loan Deal]
What should Carol buy?
Carol should buy a new car if:
- She is likely to use it for over 500km per month as the better mileage and lower maintenance will come in handy in those circumstances.
- She plans to retain the vehicle for at least five years, as it will take care of the steep depreciation in the first two or three years.
Carol should buy a used car if:
- She plans to use the car for short distances and eventually change her vehicle in, say, three years
Axis Bank offers loans for new as well as used cars at attractive interest rates and flexible tenures. For new vehicles, it provides car loans for up to 100% of the on-road costs and tenures can be as long as seven years. Additionally, it has tie-ups with several manufacturers, leading to exclusive benefits for its customers.
Axis Bank Used Car Loans offers funding of up to 100% of the car’s value, for select vehicles. Check with the bank before you apply for the loan. The loan is available for a tenure of up to 5 years. The bank also offers complete support for the transfer of ownership through its pan-India tie-ups with dealers.
In case of both new car loan and used car loan, the eligibility criteria is minimum salary of Rs 2.4 lakh per annum for salaried individuals and continuous employment for one year. In case of self-employed individuals, the minimum income requirement is Rs 2 lakh per annum. The individual should be employed for minimum of three years in the same business.
For both the loans, customers can apply online either through the Axis Bank mobile app or Net banking. For more details on Axis Bank New Car Loans and Used Car Loans, click here.
Disclaimer: The Source, a content creation and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.