Used cars are becoming popular all across India. In 2018-2019, sales of used cars crossed 4 million for the first time. Comparatively, only about 3.3 million new cars were sold. There are multiple reasons behind this. However, the ease in availability of used car loans has been one of the major drivers. Most borrowers have several questions about used car loans.
Here is a comprehensive guide that informs everything about used car loans
Which Used Cars can Get Financing?
Almost all used cars can be financed. Except for maybe certain imported variants or old cars. Lenders usually approve financing for used cars on a case to case basis.
Other aspects covered are the kilometres covered, the purpose of usage (personal or commercial), place where the car would be used (for example, a used car from a flood-prone area may not get precedence), an accident which the car could have suffered, modifications done on the car and whether the car has a clear title.
All these factors are considered to estimate the valuation of a used car.
What are the Financing Options Which are Available in the Market?
Nowadays, several financing options are available. Both banks and non-banking financial institutions (NBFC) offer used car loans. There are associate finance companies connected with specialized dealerships. The former offer used car loan whenever used cars are purchased from the latter. For example, if an individual purchases a used car from Mahindra First Choice, then she can avail of financing from Mahindra Finance.
How Much Loan can be Availed for Used Cars?
A certain amount of the vehicle may have to be paid as a down payment. Lenders usually offer up to 80% of the car’s estimated value. If the used car is a premium one, then the lender may offer up to a maximum amount, for example up to Rs 40 lakh.
What is the Repayment Period on Offer?
Setting the tenure for repayment is not easy. This would primarily depend on the quality of the car. Various lenders offer different repayment periods. The repayment period can range anywhere between 3 and 7 years.
Tell Me About the Rate of Interest
Interest rates on used cars are higher than the ones offered for new cars. For instance, the interest rates on loans for new cars would be as low as 7.75%. For used cars, it could between 10% and 16%. You may also have to pay a processing fee which would be equivalent to 1-3% of the used car value.
What Will be My EMI?
Most lenders offer a used car loan EMI calculator. You can enter the required details into the used car EMI calculator and accordingly calculate your EMI.
How Long Does the Loan Approval Process Take?
As compared to a new car, the loan approval process for a used car would be longer. However, if you are availing of a loan from an in house lender associated with the specialized dealer selling used cars, then you may receive it faster. This is because they would be able to estimate the appropriate valuation and complete verification of the car quickly.