In the last few years, there has been a boom in the used cars market segment in India because of the growth of the organized and unorganized sectors in the country. One of the major growth drivers of the used car market is the revision of the GST rates on used cars by the Indian government from 28% to 12 – 18%. Last year, the used car market was pegged at USD 21.04 million and during the forecast period, 2019-2024, it is estimated to register a CAGR of 15.12%. Nevertheless, there are certain factors like high used car loan interest rate, standardized dealership experience and fair price experience that might create a hindrance in the growth of the used car market.
Studies suggest that from April 2020, the Indian auto industry is entering the BS-VI era where the value proposition of the used car is expected to grow stronger and new cars are expected to be more expensive owing to the additional cost on technology incurred by the manufacturers. Before you apply for a loan for the used cars, make sure that the used car is in a good condition – check the condition of engine bracket, the colour of the car, engine rust, breaker bumps and underbody. Refrain from buying the used car if there is any damage or difference in the colour.
If you are planning to buy a used car and opting for loans for the purchase, here are a few tips that will certainly help you in getting a better interest rate on the used cars –
Do Thorough Market Research
Don’t take a loan from the lender just because you are having a good business relationship as the used car loan interest rate offered by the lender might be higher than the other financial institutions. The second-hand car loan rates vary from 10.50% and 18% per annum, depending on various factors.
Compare The Interest Rates
Remember that the interest rate on the loan for the second-hand cars is higher than the interest rate on the new car. So, make sure that you use the reliable online aggregators to compare second hand car loan rates. Generally, the banks lend up to 80-85% of the value of the used cars. Though there are other financial institutions offering higher loan-to-value ratio.
Don’t Miss The Fine Print
After choosing the lender wisely, remember to ask the lender about the stamp duty, foreclosure charges, processing fee, part-prepayment charges, and other administrative cost involved. Remember that most of the lenders in India don’t allow the foreclosure of a loan within six months of taking the loan.
Check Your Budget
Do the calculation of the monthly EMI that you would have to pay to the lender for the loan taken wisely. Make sure that the EMI amount suits your pocket well and doesn’t overburden your monthly budget.
