Common Car loan mistakes: Many customers do not hesitate to opt for loans to buy their dream cars. However, they often make several car financing mistakes.
As per the Federation of Automobile Dealers Associations of India (FADA), There has been an uptick in the demand for four-wheelers. Interestingly, the demand for premium cars is higher than for entry-level four-wheelers.
Buying a car is one of the most exciting and long-awaited moments for many people. Many customers do not hesitate to opt for loans to buy their dream cars. However, they often make several car financing mistakes, which make them spend more than they should or miss out on important benefits. If avoid these common mistakes. Take a look.
- AVOID EXTENDING TENURE WITH LOW EMIs
Most used car finance seekers make the mistake of opting for a longer tenure loan to reduce their EMI amount without understanding its impact on the total cost of ownership. “while longer tenure would reduce your monthly EMI outflow, the total interest amount paid during the tenure is likely to be higher as well. It’s advisable to decide which option suits you the best instead of going for a standard thumb rule approach, “says Namit Jain, co-founder and CEO of Ruppy, a car loan fintech platform
- AVOID ZERO DOWN PAYMENT CAR SHOPPING
Another common mistake is opting for a minimal down payment while availing of a loan “while it makes sense on the face of it as it saves you any upfront investment on the car, the higher loan amount also means higher interest outflow from your budget. It’s advisable to do the math basis your savings. If you do have spare savings, it may be more beneficial to put the on down payment and availing loan only for the amount that you need,” says Jain
- FACTOR IN CREDIT SCORE
Many customers are not aware of the fact that the interest rates on car loans are closely tied to their credit scores. Customers with low credit scores end up paying a high rate of interest. Such customers may also be restricted in the number of lenders and options from which to choose. Therefore, you should always keep an eye on your credit score to ensure it is clean
- AVOID EXCEEDING BUDGET LIMITS
Jain says that there is a general rule when purchasing a vehicle- you should always have your specific target in mind. For example, if you are looking for an urban SUV and it is your target to hit the road with a top speed limit of 50km/hr, you should set your budget at Rs 7 lakh. If a salesperson asks what your objective is, you should say an urban SUV. This may help you get a better deal in your budget and avoid buying something that isn’t right for you.
- DON’T IGNORE MAINTENANCE, SERVICE PLANS
Some dealers may sell you a vehicle without informing you about the product’s specifications or will try to make things difficult for you by asking you what your needs are.
“If you want a vehicle in good condition, simply ask the seller about their maintenance and service plan so that you know how much it will cost to keep your car running smoothly. If it’s an internet deal, do read the terms and conditions of the sale before purchasing anything” says Jain