Five Reasons Why People Prefer to Take Used Car Loan

We all wish to own a car, but the steep prices of these metal beauties compel us to keep this dream on hold, at least for many of us. Be it a small car or a luxury car, the joy and thrill of driving your own car are beyond explanation. Despite many banks and non-financial companies offering loans, factors like eligibility, income, work experience, credit score and the like hinders to even take a loan. However, there is always the option of buying a second-hand car if not a new one. Yes, the pre-owned cars markets have evolved manifold as compared to yesteryears. And, there are many advantages of buying a pre-owned car too. Despite the model, the price of a car will certainly run into lakhs and crores. But, the good news is, the price of the same car depreciates the moment it gets owned by someone, as much as 10-20% in the first year itself. So, imagine the depreciation after three years! This means if you buy a second-hand car, you will have to pay a lesser price for even a premium model. In addition, the new-age car owners prefer to upgrade their garage every few years, thanks to the swift launches of newer versions by automobile manufacturers. This leads to an influx of sparsely used second-hand cars in the market. So, the drop in price could come well within your eligibility criteria for you to apply for a loan, and sparse use of the pre-owned car gives you a chance to own an almost new car. However, the depreciated price still remains in the slab of lakhs, requiring you to take a used car loan.

Well, there are many who would prefer to do a direct cash transaction, there is another group that would prefer taking a loan to buy a car. Here are five reasons why people prefer to take used car loan:

1. Lessens the burden of arranging lump sum of money – Agreed that the price of a pre-owned car is lesser than that of a brand new car, yet the cost of it will be well within lakhs. For example, a brand new Honda City that may cost 12 lakhs could depreciate up to 9 lakhs once it is in a pre-owned car showroom. In a case like this, the burden of paying by cash is much more compared to buying the car with a loan.
2. Easy instalments – Opting to take a used car loan allows the buyer to equally divide the amount to be paid in affordable instalments on a monthly basis. Taking the above example, instead of arranging 9 lakhs at one go, you will have to arrange just 10-20% of this amount as down payment and remaining 80-90% can be comfortably repaid on the basis of EMI.
3. Tenure of repayment – Typically, car loans range from 1 to 5 years, but some lenders also offer loan tenure up to seven years. So, you can opt whether to go for a longer tenure or shorter tenure. In simple words, if you can afford to pay higher EMI then choose for short tenure but if you are comfortable paying less EMI then you will invariably have to choose a long tenure. The common factor in both the cases is you can choose the duration of loan repayment as per your convenience and affordability.
4. Purchase popular models – It has been observed that popular models have an upper hand on getting you better interest rates.Popular car models are more efficient in making good deals in terms of lesser interest rates, processing fees, down payments and other miscellaneous charges, as compared to rare or offbeat models. Thus, loan providers make it easy for you to own the most favourite picks across all variants.
5. Different types of loans and flexible rate of interest – Just like a home loan, you can choose the type of used car loan you would want to take. Generally, there are four different types of loan available for used cars – secured loan, unsecured loan, pre-computed loan, and simple interest loan. So, this gives the buyer an opportunity to assess his repayment capacity before signing off loan papers. In addition, interest rates for car loans are not fixed and there are many lenders trying to give the best deal. So, if you have been a loyal customer of a bank and have maintained a good credit score, then there are all chances to get a negotiated rate of interest for your loan.

With so financial advantages attached to pre-owned car loans, it is better to opt for used car loan rather than getting bogged down by the burden of arranging for a lump sum of money. So, ease your road to driving your dream car by opting for financial assistance of used car loan.