Going for a used car is not a bad idea as you can buy a good model at a relatively cheap rate. Banks usually don’t provide loans to vehicles older than 4 to 5 years. The age of the car and its model play a key role in deciding the interest rate and amount of loan that can be availed.
Interest rates of loans offered for used cars on an average cost 3-4% more than that for a new car. The loan offered for purchase of second hand cars usually ranges between 60% and 75% of the on road price of the vehicle. The older the vehicle is the more will be the margin. The repayment tenure can be chose as per your convenience, but banks approve tenure with a condition that, the age of the car and the tenure of the loan should not exceed seven years.
You can pre-pay your car loan at any time you wish. Most banks charge 2% of the outstanding balance as pre-closure penalty, and with NBFCs it can go up to 5%.
Though most banks now offer loans for used cars, banks are more comfortable in providing loans for new cars. That might be the reason why the manager suggested you in going for a new car. The decision is yours! You can check out details of used car loans with various banks and compare the available schemes to get into a decision. Taking loan from the same bank where you have account can be beneficial for negotiating or for interest rate concessions.