The world over, the automobile industry and the auto finance sector have traditionallyshared a symbiotic relationship. In India, this relationship has come into its own over the last decade and a half. In fact, the post liberalization era has seen the Auto Finance sector in India emerge as an integral entity of this multi-million dollar industry.
The twentieth century is the era of instant buys. Research indicates that 60% of the cars bought in the last decade were through finance. The consumer is besieged with so many offers that it becomes well nigh impossible for him to decide which the best is.
"Enjoy now Pay later" is a well-entrenched concept at least in urban India. Retail finance schemes have flourished mainly because the consumers are not willing to wait to enjoy the fruits of their labour. Instead of saving for years to accumulate a capital sum to purchase an asset on a future date, consumers want to enjoy the asset today and are willing to pay a slightly higher cost for it. Rising inflation encouraged the consumers to understand and accept the concept easily. Availing finance hedges the consumer from inflation.
Car finance can be very confusing. Unfamiliar words, lengthy technical contracts, and manipulative sales techniques can make shopping for finance more difficult than shopping for a car.
To most people seeking finance, what appears of supreme importance is - how much more do I end up paying over and above the finance amount availed Nevertheless this alone cannot help judge a good scheme from an expensive one. Although all the three options may appear similar and signing on the dotted lines of the agreement seem more like procedural ritual before owning a car, knowing certain aspects of the transaction is very important.
Different Car Finance options available
A loan is a credit facility extended by a Bank to the Borrower, which is repaid in installments over a period of time i.e. 'the loan tenure'.
Loan for a car can be obtained from Indian & foreign (Multinational) Banks.
What does vehicle loan mean
When you purchase a vehicle on a loan, a bank or another financial institution pays for
most or the entire vehicle up-front and you agree to pay back the money over a fixed period
The amount of money you contribute up-front is referred to as the "down payment" and the amount you borrow from the institution is called "Principal". Down payment you make will depend upon your financial situation but typically the payment varies form 10% to 20% of the total price of the vehicle. Used vehicles generally demand a 20% or more down payment but you can get away without paying a single rupee for a new car. (if you qualify)
The payback period for a loan is typically up to five years. You can increase or decrease it depending upon how much you can pay per month. The financial institution will charge you "interest" for using their money. Interest rates vary depending on a number of factors such as your income, credit rating, where you live etc. Currently new car loan rates start at () %.
When you sign up for a loan make sure you ask enough questions to make you comfortable with the deal and to avoid potential problems in future.