Does choosing a car model have any influence on car loan interest rates?
Yes, not many people are aware of the fact that interest rates for car loans differ of various car models. Interest rates for cars in the small and medium category are a tad higher than those in the high end or premium category. Hence make it a point to choose your car make and model wisely as a wrong car selection can mean you end up paying a higher car loan escalating the overall cost of your car purchase. Always compare car loan quotes from multiple lenders before deciding on the loan.
It’s a lesser known fact, but the car model you wish to purchase will have an impact on your Car Loan interest rate. Your Car Loan is a secured loan and your car works as a security i.e. it is hypothecated to the bank for the loan tenure.
If you default on your Car Loan, the bank will seize your car and recover the balance payment by putting it out for sale. Hence, banks consider the resale value of the model you are buying to set your interest rate. Popular car models have a higher resale value hence banks might offer a lower rate of interest on it.
Other than the make of the car, the age of the car too has an influence on the interest. The interest rate on a pre-used Car Loan is more than that for a new Car.