Looking to buy a car? Then most likely you would be looking for a car loan.
Not surprising, since between 75-80% of new cars bought in India are financed by banks. Before you decide on your car financier, keep these thumb rules in mind.
Be conservative about the car you buy
Everybody wants to own that ‘Dream Car’. So even before you apply for your car loan, you need to get a fix on which car to buy. Do substantial online and offline research on car models and their prices before making a decision. Remember a car is a depreciating asset and loses 25-30% of its value the moment it is driven out of the showroom. It therefore makes sense to be slightly conservative in your buying decision. Remember, the more expensive the car, the greater the cost and hence, the higher your EMI. Choose a model where the loan repayment is not a huge burden on your monthly budget.
Shop for the best deal
Car dealers have substantial leeway in terms of offering discounts. So, go to multiple dealers and negotiate hard to get the best possible deal. Again, remember the formula, the lower the cost of the car, the lower the EMI.
Check your credit score
The interest rate offered to you by the bank will depend on your credit score. So, check your credit reports before approaching the bank. Ensure that there are no discrepancies in your credit reports and if there are, sort them out. It will help you get a better deal from the bank.
Make as large a down payment as you can afford
Buyers often make the mistake of making a minimum down payment and getting the rest financed. This is actually a mistake. A smaller down payment means a bigger loan amount and hence a larger EMI.
Avoid long tenures
By opting for a longer tenure, you may be able to reduce your EMI, but the total interest you will pay and hence the cost of the car, will be substantially higher. Ideally, opt for a tenure between three and five years, depending on your repayment capacity. Remember that the resale value of a car depreciates substantially after five years. You don’t want to get caught in a situation where your outstanding principal on the car loan is more than the resale value. You can calculate how much EMI you can pay by using this
car loan EMI calculator
Never miss an EMI
Missing an EMI will affect your credit scores adversely, making it difficult or more expensive to get any loans in the future. Also, if you miss several EMIs, the bank may even repossess the car.
If you are interested in buying a car, Axis Bank can help you with excellent offers on a Car Loan
Disclaimer: This article has been authored by The Source, a Mumbai based content creation and curation firm. Axis Bank doesn't influence any views of the author in any way. Axis Bank & 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.