There are numerous choices for consumers when it comes to buying a new car. It is not simply about picking a model and brand of the car but the bigger question is whether you want to buy a new car or a used car. This is a very important decision and will make a huge difference to your finances. You need to determine the purpose of purchase and also consider whether you qualify for a loan or not. Loans for new car and used car are available at varying terms and interest rates. An insight into the difference between the two loans will help you choose the one that is perfect for your needs.
Advantages of new Car Loan
When it comes to a new Car Loan, there is a warranty from the manufacturer and the same will reduce some work for the lenders. In a new Car Loan, the entire process is less troublesome and it has a higher insurance premium. Banks prefer to disburse new Car Loans because the risk is lower and the total amount disbursed is much higher. You can get a loan for about 90% of the cost of the car and the interest on the same will be low. Many banks provide loans on the ‘on road’ cost which reduces your burden. The tenure of the loan is usually between five to seven years so that borrowers can manage their EMIs comfortably. The interest rate ranges anywhere from 9% onwards.
Further, new cars have the latest features and technology which means you can find a car that has a higher mileage and lower emission. There are a range of additional features in new cars which can enhance your driving experience.
HDFC Bank Custom-fit Car Loans could be the best fit for your funding requirements for purchasing a new car as it offers benefits like pocket-friendly EMIs, hassle-free documentation and flexible repayment tenure to name just a few. With loans such as Step Up Loan, Balloon EMI and more, you can now purchase a bigger with a smaller car EMI.
Read more on how to manage your Car Loan EMI without any burden.
What to watch out for
Financing might be the only way to purchase a new car but there are certain things you need to keep in mind. Since there is an insurance premium attached to the new car, your annual cash outflow will rise. Even if the interest rate is low, the total outflow will increase due to the insurance premium.
Advantages of a used Car Loan
The cost of a used car will be lower than that of a new car which means the cost of insurance will also reduce. In a used Car Loan, the borrowing amount will be lower and the repayment terms will be flexible. You will have a tenure of 60 months to make the repayment of the loan.
Disadvantages of a used Car Loan
If you are keen on applying for a used Car Loan, there are a number of things you need to keep in mind. The loan amount will only be about 80% of the value of the car and the rest will have to be your down payment. The interest rate will also be higher as compared to that of a new Car Loan. This ranges around 13% onwards and the EMI burden will also be higher for you.
You need to consider your needs and preferences to decide which is the most suitable option for you. You also need to consider whether you will be able to afford the car. HDFC Bank Car Loan offers loans for new and used cars. They offer 100% funding and quick disbursals. The entire process is quick and straightforward. The eligibility criteria for the loan is minimal and there are low processing fees for the same. It is advisable to do your research and make sure you choose a reliable model. If you do not have much knowledge about cars, then you should ask a mechanic to look over the car before you make your buy.
You can apply for your Car Loan from HDFC Bank here.
* Terms & conditions apply. Car Loan disbursal at sole discretion of HDFC Bank Ltd.