Given the times, commuting in your own car is probably the best bet to keep the deadly coronavirus at bay. If you have decided to buy a car, the next question that comes to mind is whether to buy a brand-new car or go with the trusted used car. A new car will deliver a better performance but will cost you more, while a second-hand car can be a good option financially, but you may have to compromise on certain features.
In any case, opting for either of the options will make a huge difference to your finances. If you are planning to take a car loan, then find out whether you qualify for it or not. Most of the
financial institutions offer both used car and new car loans.However, before deciding to purchase the car credit, you need to know the features and advantages of both the loans.
So, let us take a look at them.
Features and advantages of used car loan - - Interest rates are higher -The rate of interest of a used car loan is generally higher than the new car loan. This is due to the absence of a manufacturer's warranty. Moreover, lenders take into account the health of the engine and other body parts, which makes financing of used cars slightly risky, and hence a higher rate of interest.
- Insurance premium - The insurance premium is determined by the quality, mileage and manufacturing year of the used car.
Also Read: Financing Your NEW Used Car - The loan offered is up to 80-85% of the car value - The risk entailed is greater when it comes to used car, as its history cannot be fully ascertained. So, most of the financial institutions offer loans at around 80-85% of the car's value.
- Certified pre-owned cars - A certified pre-owned car dealer plays a vital role in obtaining the loan faster and at a flexible tenure. These agencies inspect the used cars thoroughly and get all the issues fixed. Once these sellers certify the car, it is much easier to get the loan.
Features and advantages of new car loan - - Interest rates are lower than the used car- The interest rates are usually lower for a new car loan as the vehicle comes with the manufacturer’s warranty. Most car dealers give you bumper-to-bumper warranty that covers the vehicle for a period of three years. It means, if anything goes wrong with the car, you can take it for repairs for no charge.
Also Read: Guide to Financing Your NEW Used Car! - Loan amount - The loan is offered up to 95%, and at times, 100% of the on-road price of the car.Most of the financial institutions offer loan of up to 95%, and a select few even give up to 100% of the ex-showroom price of the car.
- Down payment - There is no requirement of down payment with lenders offering 95-100% of the car’s on-road price.
- Less paperwork - The process to apply for new car loan is quicker with less paperwork as there is no hassle of transferring of the title and no need of checkpoints, etc.
- Loan tenure –You can get longer tenure in case of new car loans. Most of the financial institutions offer a tenure of up to eight years.
- EMIs –Low-interest rate and longer tenure mean the Equated Monthly Instalments (EMIs) will also be lower, making it easier for you to repay the amount.
Also Read: Personal Loan vs. Pre-Owned Car Loan : Which one is better for buying a pre owned car? To conclude Consider your needs and preferences to choose the best option for you. It is advisable to do research with respect to the best deals and offers available in the market. Also, in case of a used car, you need to take into account the age factor, as it greatly influences the eligibility criteria to avail the loan.Buying a car is significant commitment, so do your due diligence before arriving at a decision.
