Lots of financing options are available nowadays for pre-owned cars. Almost all big banks along with NBFCs provide special loans to individuals looking to buy pre-owned cars.
In India, the market for pre-owned/ used cars is currently booming. According to some recent reports, 220 pre-owned cars come into the market for sale, for every 100 new cars sold. The annual volume in the used car market is estimated to be 50 per cent more than new car sales. Experts say the sale of used/per-owned cars has increased because of the easy availability of finance. Lots of financing options are available nowadays for pre-owned cars. Almost all big banks along with NBFCs (non-banking financial institutions) provide special loans to individuals looking to buy pre-owned cars.
Earlier, these deals used to happen only through references and within the known circle of people. However, with the arrival of companies who facilitate buying and selling of used cars such as CarTrade, Cars24, CarWale, Droom, etc., this market segment has been growing rapidly.
If you are also planning to get a pre-owned/used car loan, here are a few points to keep in mind:
- Compare interest rates using online websites of banks such as SBI, HDFC, Axis Bank, along with NBFCs before deciding where to apply.
- The loan tenure for these type of loans ranges from 3 to 7 years. While selecting the tenure, note that a longer tenure might reduce the EMI outflow, but raises the total interest cost on the loan.
- The interest rates on pre-owned car loans range from 8.8 per cent up to 17 per cent.
- If you opt for a pre-owned car loan of Rs 7 lakh, for 5 years at the lowest interest rate 8.8 per cent, the EMI would be Rs 14,463 and the total interest payable over the loan tenure would be Rs 1,67,780.
- Similarly, if you take the loan at the highest interest rate of 17 per cent, you would have to pay an EMI of Rs 17,397 and the total interest payable would be more than double, Rs 3,43,808.
- Watch out for high processing fees. Few banks charge a high processing fee for these loans, which can go up to almost Rs 12,000.
- You can also look out for other loan options as the interest rates for these types of car loans are quite high.
- Experts suggest borrowers can also explore options like a personal loan or a top-up home loan (if you have an existing home loan) if they offer cheaper rates.