Bring Home Your Dream Car with a Second Hand Car Loan

Planning to bring your dream car home? Have you considered getting a used car instead of a brand new one? Recently, the demand for second-hand cars has increased owing to the many benefits they have over the new ones. Nowadays, there are multiple options for used cars available in the market and with a second-hand car loan, buying a car has become much easier. Additionally, a pre-owned vehicle comes with benefits such as lower price and a slow rate of depreciation that are not commonly found in the case of new cars.
 
If you are unsure about getting a used car as your first car, then think again. Here are five advantages of owning a second-hand vehicle in India; plus, some tips for securing a loan to finance your purchase:

Advantages of Acquiring a Pre-Owned Car

The list of advantages of owning a pre-owned vehicle is extensive. Some of them are:

1. Value for Money

   In India, buying a car is a big and expensive decision, especially if it is your first car. However, one of the most common concerns while buying a new car is the price tag. Since most new vehicles arrive with a hefty price tag, we often deter from buying our dream car or brand as the thoughts are diverted to more practical preferences and assessment if the car model is a good value for our hard-earned money.
   
   On the other hand, a pre-owned vehicle generally arrives with a much affordable price tag which means that not only can more people afford it, but it also offers a better value for money; the two factors that heavily influence our car buying decision.
    

Also Read: Quick Guide on Pre-Owned Car Financing
 

1. Slow Rate of Depreciation

   Next to the hefty price tag, one common concern with all new vehicles is the steep rate of depreciation they suffer. If you look at the numbers, from the time a new vehicle leaves the showroom till it is used for one year, 30% of its price is already depreciated. Although this might not appear like a huge concern at the beginning, however, if you analyse the scenario from a financial standpoint, then any depreciation in the price of a product, especially to such a great extent, makes it lose its worth.
   
   On the other hand, since most pre-owned vehicles are at least one year old, they have already overcome the steep depreciation curve. It means that if you acquire it now, it will retain a significant amount of its value in the future.
    

1. Lower Registration and Insurance Costs

   If you have previously researched buying a car, you would be already aware of the fact that the cost of insurance for any vehicle is dependent on its age. The newer the vehicle, the higher will be the insurance cost and vice versa. On the other hand, since a pre-owned vehicle has already aged gracefully, the insurance costs are generally much lower.
   
   Likewise, in India, the registration fee for a vehicle is calculated based on the total cost of the transaction. Since, in the case of a pre-owned vehicle, the price tag is more affordable, the registration costs automatically come down.
    

1. Tried and Tested

   One of the biggest advantages, and yet one that is undermined the most, is that all pre-owned vehicles have been tried and tested by previous owners, and have stood the test of time. Although a sparkly new vehicle may look more attractive, in reality, a pre-owned vehicle has a longer shelf life, a key determinant when you are making a purchase decision.
   
   Inherently knowing that what you are buying today will last you for the foreseeable future is a great value for money indicator.
    

1. Lower Loan Amount

   Last but not least, to purchase a pre-owned vehicle, you will need to borrow a lower amount of money from the lender, which in itself will equip you to save more in the long run.

Also Read: All Your Car Loan Questions Answered
 

Things to Keep in Mind When Buying a Used Car

Before deciding on financing your purchase of your dream used car, you must consider several factors. If you ignore them, you may have difficulty obtaining a low-interest loan.
 

Personal Inspection

Perform a physical inspection of your shortlisted vehicle before purchasing it. Check to see if it is the same make and model as the information you obtained from an online source. Look for dents and scratches on its body as well. It is possible that the pictures of the car you saw online were edited to hide the scars on the car's body.
 

Test Drive

There are numerous flaws in a car that are not visible to the naked eye. As a result, a test drive is highly recommended. Request the seller to let you take a test drive for at least 10-15 kilometres. It will assist you in better understanding the mileage of the vehicle. Aside from that, listen for any strange sounds coming from the car engine.
 

Document Verification

To ensure the car's legitimacy, you must examine the various car-related documents provided by its previous owner. There have been numerous reports of car theft and the sale of stolen vehicles on the used car market. As a result, it is critical that you inspect the vehicle's registration certificate to ensure that the seller is the original owner. Also, ask for a road tax receipt to see if it has been paid to the relevant authorities.
 

Car History

Before purchasing a car, ask the seller numerous questions about the vehicle's history. Request for insurance documents to learn how many claims the previous owner filed and for what reasons. Request the service record book to determine why the vehicle was brought to the service centre.
 

Check the Warranty Report

Ask the seller to provide you with the warranty report. If the vehicle you intend to purchase is still in the warranty period, you are likely to get your used car loan approval immediately. 
 

How to Get a Loan for a Second-Hand Vehicle?

Now that you know the advantages of buying a used car, here is how you can secure a second-hand car loan.
 

1. Online Process

   Easily, the online process is the most convenient option for most of us. To apply for a used car loan online, follow these steps:
    
   • Research second-hand car loan options of various financial institutions online.
   • Shortlist options that best suit your need and budget.
   • Compare them and look for the best second-hand car loan interest rate, loan amount on offer and check if the lender has an option for the loan tenure extension.
   • Once you have chosen a lender, visit their official website and initiate the application process.
   • In this step, you will need to enter the details of the purchase such as car make and model, dealership and most importantly, the loan amount you require.
   • Follow up this step by entering your personal information including your eKYC information, followed by your income information. While completing this step, make sure you have your Aadhaar Card and PAN card present with you, along with your latest salary slip and three months bank statement, in case you are a salaried employee, and your latest ITR filings and six months bank statements in case you are self-employed.
   • Upload all the relevant documents and apply. Once approved, the lender will send you a loan offer letter. All you need to do is present it to your car dealership and you can proceed with your purchase.

You can also use a second-hand car loan calculator to figure out the amount of EMI you will need to pay for your loan amount and tenure. A loan calculator can come in handy assessing your monthly budget and how you can fit in the repayment amount without disturbing your monthly expenses.

 Also Read: Want to drive home your favourite car Here’s how Hero FinCorp's Pre-Owned Car Loan can fulfil your dream
 

1. Offline Process

   Here are the steps to follow if you want to fill your loan application offline:
   • Visit a used cars dealership near you.
   • Once you have chosen the make and model, enquire about the financing options they have.
   • Most dealerships generally offer financing options from multiple lenders. Compare their interest rates, loan tenure options and the offered loan amount before choosing the one that suits your needs and budget best.
   • After choosing the lender, complete the loan application process by taking assistance from the sales representative. Once your loan is approved, you can complete your purchase.

 

Follow These Tips to Get an Affordable Used Car Loan

• Always consider the resale value of the car, whether you intend to keep it for the rest of your life or sell it after a year. A car with higher resale value will help you secure more affordable car finance. It also allows lenders to recoup much of the unpaid debt if you default in the future. 

• If you have a windfall gain at the time of applying for a used car loan, use it to increase your down payment. A higher down payment significantly reduces the lender's risk, and as a result, you will be approved for a low interest loan.

• Avoid buying a car whose production was halted by the manufacturer years ago. Such vehicles have a low resale value, and lenders either refuse to lend on them or charge higher interest rates.

• Compare used car financing rates from various financial institutions. Examine the eligibility criteria to see if your income and other parameters meet their requirements. Applying with the one whose requirements perfectly match your profile can help you secure a low-interest car loan. 

Conclusion

Buying a pre-owned vehicle comes with several benefits, and these days, with so many financing options available in the market, it has become easier than ever before to purchase your dream vehicle. Now that you know of the process, go ahead and bring your dream car home today.
 
Disclaimer: This post was first published on 21st May 2021 and has been updated for the latest information, freshness, and accuracy.