Car Used Finance – Best ways to finance that existing car 4 min read. Updated: 20 Aug 2020, 07:38 PM IST Tinesh Bhasin Premium
As state governments slowly lift the ban, many office-goers may want to avoid public transport and opt for their private vehicles. Many of these buyers would choose used cars because of the lack of budget and because they can use the vehicle until the threat of covid-19. According to a survey conducted on the online classifieds portal OLX, of people who plan to buy a car in the next three to six months, 54% would prefer a pre-owned vehicle. The survey, conducted by the company between April and July, covered more than 3,800 respondents.
Car Used Finance
But financing a used car is difficult. Interest rates are higher (by 3-7%) than lenders offer on new cars, and each lender looks at different parameters. “Interest rates on used car loans are higher compared to new car loans. For lenders, the risk is higher with a used car. It is difficult for them to ascertain the history of a pre-owned vehicle, says Abhinav Kaul, vice-president, strategic partnerships, BankBazaar, an online financial marketplace. car loan.
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The pre-owned car market is 1.2 times the size of the new car market, based on the number of cars sold, according to the Spinny car platform. “Used car dealers are growing 19% year over year. Also, the number of women inquiring about used cars has increased by over 400%,” said Niraj Singh, CEO and founder, Spinny.
Many buyers are looking for a used car, as many are facing cash flow problems due to the pandemic. “There is economic uncertainty. Although buyers want a car, they have a limited budget. That’s why many people opt for a used car, says Singh.
There is also demand for those who have a car in the family but travel by public transport. Now each member of the working family needs a different vehicle.
State Bank of India offers new car loans starting at 7.7% per annum. But used car loan rates start at 9.2%, according to Paisabazaar.com. HDFC Bank offers new car loans between 8.8% and 10%, and used car loans start at 13.75% and go up to 16%. Some lenders, too, have similar differences between the two loans. Axis Bank offers new car loans at 8.95-11.2% and used car loans at 14.7-16.7%. Federal Bank car loan old is 14.05% and new is 8.75%.
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This is because used cars are considered dangerous as there is no information about their condition, past accidents, engine condition etc. Also, there is no warranty available on a used car, unlike a new one.
Factors such as the model and age of the car are also important. “The life expectancy of a car is generally considered to be 15 years. Most banks will not finance a car older than 8-10 years. Also, if you are buying a five-year-old car, the term of your loan will not exceed three to five years. Moreover, most banks do not finance more than resale,” Kaul said.
With used car loans, the chances of getting a full loan are lower if someone defaults. “Used cars have a low resale value. In case of default, if the lender takes over and sells the car, there are always chances that it will not be able to recover the entire loan amount, said Naveen Kukreja, CEO and founder of Paisabazaar.com, online. a place to sell financial products.
There may be other problems with used cars as well. The current owner may have an outstanding car loan. In this case, the seller will need to first close the existing loan, get a certificate of non-objection from the lender, get the hypothecation removed from the registration certificate (RC) and get a new RC deed without hypothecation, before selling it. All of this can be time consuming. The new lender will not lend money until this process is completed.
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The lender, typically, provides loans up to 60-80% of the value of the used car as against 85-100% of the on-road value of new cars. “The loan to value ratio depends on the model, age and condition of the car. Borrowers should be ready to contribute up to 50% of the value of the car as the loan limit,” said Kukreja.
If you are getting a high interest rate and not the money you are borrowing, you can look at other options. The first option is to take out a top-up loan if you have an ongoing loan. The interest on a home equity loan is very affordable, and the process is easy compared to getting a used car loan. You can finance the entire price. The term of the loan, in this case, will be longer. Keep in mind that the longer the tenor, the higher the interest rate will be. But you can always prepay to avoid the additional interest burden.
The second option is to go for a personal loan. Interest rates on personal loans can vary. A borrower with a high credit score can get one as low as 15%. Assume that rates are at least 1.5% lower than the average used car loan.
Third, many pre-owned car dealerships are also tied to lenders. They offer cheap used car loans. Spinny, for example, offers used car loans at 12.5% to its partners. “Companies that sell used cars, they test and verify. Lenders, therefore, have the comfort of lending through them. As their risk is reduced, they are willing to lend money at a lower cost through collaboration with such platforms, Singh said.
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Public sector banks (PSBs) offer used car loans at competitive rates, but they cater mainly to their existing customers. If you can’t get a loan from a PSB, go for other options.
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With a strong reputation for reliability, performance, safety and value, a certified used vehicle from Canadian Auto Remarketing in St Albert, AB, is a great opportunity to consider because we can keep our overhead costs low so we can offer the best affordable and deeply discounted vehicle prices privately and or our fleet of vehicles across Canada, from $5,000 for a car to $700,000 for an exotic or sports car, we have the same ability and access to a vehicle.
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