Points to Remember Before Taking a Used Car Loan

Car buyers in India traditionally prefer buying new cars; a used car is usually bought while upgrading from a two-wheeler or if one requires an extra set of wheels. Earlier most people purchased used cars from known sources – friends or relatives. Times have changed, and you would be surprised, but this option has become extremely popular. It allows buyers to purchase a more superior car with a majority of its life left and pay far lesser than a equivalent new car. This is because the initial depreciation on cars is the highest, post which the prices don’t fall as much.

With car manufacturers like Maruti Suzuki and Mahindra, getting into the used car finance space, there has been an increase in credibility and trust in this market. A lot more people now purchase these certified used cars, the pre-owned car market is expected to grow at 15%. This has also resulted in an increase of used car loans and financing options.

Although getting a used car loan has become easier, banks usually do not offer more than 70 to 80 per cent of the car’s actual market value. The interest rates for these are also higher in comparison to new car loans and the loan tenure is usually shorter.

Choosing the Right Used Car

Start by making sure that you are choosing the right car. When it comes to taking a used car loan, it’s essential to remember that not all used cars are eligible for financing. The car’s age should be less than 8 years old for eligibility. In addition, the documents and the condition of the car should be thoroughly checked before closing the deal.

Ideally one should choose a popular car as these are available in larger numbers and easier to get financed. Brands such as Honda, Toyota and Maruti make for good used cars. Try and avoid a car which has run a lot. The newer the car, the lower will be the maintenance and operational expenses. Also if a car is more than 4 years old, its best to buy it from a certified used car dealer, since they conduct thorough technical checkups and may even provide a warranty and a few free services or check-ups.

Search for a car which is still within the manufacturer’s warranty. This way, you will save on certain unforeseen expenses and technical faults if any, will be taken care of by the manufacturer. Any used car, which still within the manufacturer’s warranty will cost more in comparison to an out of warranty car, but the within warranty is always a safer bet.

During purchase, it’s very important to take a long test drive, and ensure that it is mechanically sound. Check all electrical bits and functions, features, etc. You could also request a trusted mechanic or an auto-enthusiast friend to assist you while inspecting the car.