Tips to Buy a New Car


#1

Buying a new car is always an exciting occasion! It is even a dream for some people that it becomes an important decision that requires careful planning. Hence you need to as yourself the following set of questions before buying a car.

  1. What kind of car suits my lifestyle?

Think which type of car will suit your lifestyle. Do your basic research to know if it will fit into your budget, bearable maintenance costs, durability, etc. Analyze if you need a hatchback, sedan or SUV, besides looking for the features you wish to have in your car.

  1. What is my budget?

There are cars that ranges from as low as 1.5 lakh to more than a crore! So you need to identify the car that comes under your budget. While buying the car, also look into the right insurance option.

  1. What is the reason for getting a car?

You need to think why you need a car before buying one. Figure out if it for daily commuting, recreation, weekend trips, driving in the city or highway. These factors will give you an idea on what kind of cars to choose!

  1. What would be my EMI if I take a loan?

There are a lot of financial institutions that gives car loans. Choose the best one in the industry that charges low fee and think about if you can pay the EMI regularly without defaulting it.

These a few basic components that you need to look into while buying a new car.


#2

Acar loan is a secured asset product (asset for the bank or financial institute) where the lender issues a certain sum of money to the car dealer on behalf of the customer. The amount of money that the lender gives to the dealer is called loan to value (LTV) and is usually capped to about 80% of the total value of the car. The rest of the 20% needs to be borne by the customer.

For lending this amount, the bank charges an interest rate to the tune of around 10% which is charged to the customer as a component of the equated monthly installment (EMI). The customer has to pay the EMI amount every month, from the month after the loan is disbursed. The loan is given by the lender against the car, so, if a customer defaults the loan, the lender is liable to take back the asset (which in this case is the car). An asset which is under a loan is known to be hypothecated to a lender.

The rate at which a lender lends is called Rate of Interest (RoI) and is decided by the lender based on some guidance given by the central bank. The bank uses the money it takes as deposits from its customers to lend to other customer, or it borrows money from other banks or a central bank, like RBI, to lend to its customers. The lender attaches a premium to the rate at which it borrows from others and prices the loan for the customer at the given RoI.

It also attaches a processing fee for all the documentation it needs to perform to disburse the car loan which could be anywhere between 0 to 2% of the loan value.