Auto Loan: Old vs New Car? Points to know before spending hard-earned money
lmost every bank provides the facility of car loans on both new and second-hand cars. However, the interest rates, formalities, down payment ratio on cars could be different from bank to bank.
Possessing a car has become a matter of status for many people. For some, it has become a necessity as well as a status symbol, especially in big cities. People generally prefer to buy a new car, even as they have to take an auto loan. However, the necessity can be fulfilled even by a used car available at a cost much smaller than the new ones
It is also important to decide on whether you want to go for the new car or a second hand one. Loans are available on both the new as well as the second-hand cars. Almost every bank provides the facility of car loans on both new and second-hand cars. However, the interest rates, formalities, down payment ratio on cars could be different from bank to bank.
Let's find out what differences loans on new and second-hand cars have
New car loan vs Old car loan:
1. Hectic process and more insurance premium:
In case of a new car loan, there is always a warranty from the manufacturer, which reduces some work for the lenders. The entire loan process is less troublesome and hectic, while the car has a higher insurance premium.
Old cars do not really attract banks to provide you loans easily. The loan amount will be not more than 80 per cent of the car's value, while the insurance premiums will always be low in case of a second-hand car.
2. Banks prefer loans on news cars more:
The banks prefer to provide new car loans because of low risk on new cars and they provide easy loans in order to lend more amounts. Also in the case of a new car loan, the person can avail the loan for about 90% of the cost of the car and the interest on the same will be low. The interest rate ranges anywhere from 9% or above.
In the case of second-hand cars, the banks will be less likely to show interest and the interest rate would be over 13 per cent in any case.
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3. What to prefer?
The new cars come with latest features and technology, better mileage and lower emission. Also, there is a range of additional features in new cars, which can enhance your driving experience.
In case of an old car, it is always advisable to get it checked with mechanics or car experts before buying. The second-hand cars are always a good option as it saves you money, depreciation, premium cost etc. But, if you are looking to buy a car on loan, it is advisable to go for a new one, if it is affordable.