Which one is better a luxury car or regular car purchase with the help of a car loan

If you're looking to purchase a car, you may have a question about whether to buy a new car or a used car. A lot of your friends and family may have recommended you to get an old vehicle because it would cost less than a new car, and you'll be able to save some money. The price of a used car would be cheaper than a brand new car, so you will have to pay money for the car's repairs, although the insurance premium will be higher in the case of a new car. Below are some of the things you can bear in mind when you opt for a used car loan. 

New car loan vs. old car loan.

• Loan amount

You don't have to deal with an unknown vehicle history in the event of a new car. A new vehicle comes with the manufacturer's warranties for years or several kilometers are driven by the car. This is taken into account before supplying the banks with a car loan. In the case of a new vehicle, the value of the loan disbursed is usually greater than the amount of the loan disbursed in the case of an old car loan. In the case of the used car, the debt-to-value ratio (LTV) is smaller, and in the case of a new car loan, the loan-to-value ratio is higher. In the case of a new vehicle, ICICI Bank issues a loan of up to 100 percent of the ex-showroom price of the car, and in the case of a used car, a loan of up to 80 percent of the value of the car is given.

• Tenure

In the case of a new car loan, you can get a loan for a longer time. ICICI Bank provides a used car loan for a term of 5 years, while in the case of a new car, the length of the loan can be up to 7 years.

• Interest rates

The risk associated with the bank is greater in the case of used vehicles because they prefer to charge a higher rate of interest. Canara Bank Car Loan issues a used car loan at an interest rate of 15 percent, while a new car loan is offered at an interest rate ranging from 11.50 percent to 12.50 percent. 

In terms of interest, you can end up spending higher, thereby increasing the total cost of purchasing a vehicle. Suppose you pay Rs 35,000 extra for 2 years in terms of higher interest compared to a new car loan where interest rates are lower than you take an old-car loan of Rs 5 lakh at an interest rate of 15 percent.

• EMI

As the interest rate and tenure on a new car loan will be lower, the corresponding monthly contributions (EMIs) will also be lower. So, repaying the car loan without any pressure would be better for you.

This is the checklist of the documentation needed for a car loan application: 

1. The proof of age 
2. Evidence of identity 
3. Formula for Framework 
4. Passport size photo   
5. Proof of residency 
6. Proof of income 
7. Statement of the bank 
8. Proof of Signature Authentication 
9. Invoice or Rate List for Pro-forma

Fair interest rates, manageable EMIs, streamlined paperwork, and easy disbursements are some of the reasons why car loans have become such a convenient choice for today's common man. Now the thought of buying a car is no longer far-fetched-a few papers are everything you need. 

Predominantly, lender banks are searching for evidence that you are a reasonable financial risk and are in a position to repay a car loan. This detail, combined with your credit report and ranking, will directly affect the interest rate you are paid. Because your credit rating would be evaluated when applying, it is worth clearing up any current debts before you file your initial application. This would boost your odds of acceptance. If you have a poor credit background, the lender's bank may probably like to see the credit card statements, mortgage records, and the verification of any loans that you possess. 

Some banks will request such documentation from you that other banks do not require, so it is advisable to have a cross-check with the lender bank before you meet with the loan officer.

Also read:- Advantages of a Car Loan