While financing might make purchasing a vehicle more reasonable, spending outright cash can get you a better price and eliminate the need for annual payments.
New Delhi: Car sales are expected to cross the 10 lakh mark in the upcoming festive period due to pent up demand, especially for utility vehicles. The 68-day festive period this year falls between August 17 and November 14.
While purchasing a car there are two options available for the owner, whether to go for a car loan or pay ouright cash. While financing might make purchasing a vehicle more reasonable, spending outright cash can get you a better price and eliminate the need for annual payments.
If you don’t want to delay your car purchase but don’t have the money you need for it, then you will need a car loan. But what if you have enough savings? What should you do then?
If you are invested for the long term, breaking your investments for a car doesn't make sense
"Ideally, it is dependent on an individual’s finances, however in today’s scenario even if someone has surplus money, it is largely invested in equity markets via shares or mutual funds. If the original goal of that investment is for the long term and not for the car, then breaking them would not be recommended. However, if you have invested money to buy the car then it is better to use that to fulfil the goal," said Krishna Kanhaiya, CEO of Mirae Asset Financial Services .
If you are invested for the long term, breaking your investments for a car doesn't make sense
"Ideally, it is dependent on an individual’s finances, however in today’s scenario even if someone has surplus money, it is largely invested in equity markets via shares or mutual funds. If the original goal of that investment is for the long term and not for the car, then breaking them would not be recommended. However, if you have invested money to buy the car then it is better to use that to fulfil the goal," said Krishna Kanhaiya, CEO of Mirae Asset Financial Services .
While calculating your savings, don't take into account savings kept aside for emergencies
Today car loans are available at relatively cheaper interest rate compared to personal loans and there are many pocket friendly cars available in the market. While calculating savings one must not count savings which are kept away for emergencies.
Today car loans are available at relatively cheaper interest rate compared to personal loans and there are many pocket friendly cars available in the market. While calculating savings one must not count savings which are kept away for emergencies.
"The total cost of loan should include processing, documentation costs, Mortgage cost and others. Usually if you take a car loan the cost of car increases by almost 20% to 30% depending on the tenure of the loan. Currently Interest rate charged by the banks are around 8.5% to 9%. One has to compare this cost to the interest benefit on savings [net of tax] while deciding if a car loan is better or one should directly go for buying a car from savings," said Anshu Agarwal, Global Head of Finance at Branch International.
A car loan is available based on the income generated so it might be difficult for many people to go for a car loan and wait till they generate enough savings to buy a car.
Usually, banks provide loans to salaried class much faster compared to individuals whose source of income is business.
Usually, banks provide loans to salaried class much faster compared to individuals whose source of income is business.
If you have a good credit score, you may be able to get a lower interest rate on a car loan
This could save you money in the long run. "Make sure that you can afford the monthly payments on a car loan as you don’t want to end up in debt. Car insurance is mandatory in India. The cost of car insurance will vary depending on the car you buy, how old the car is and the total claims taken on the car. Cars require regular maintenance and repairs so you need to factor in this cost as well," said Adhil Shetty, CEO of Bankbazaar.com.
This could save you money in the long run. "Make sure that you can afford the monthly payments on a car loan as you don’t want to end up in debt. Car insurance is mandatory in India. The cost of car insurance will vary depending on the car you buy, how old the car is and the total claims taken on the car. Cars require regular maintenance and repairs so you need to factor in this cost as well," said Adhil Shetty, CEO of Bankbazaar.com.
Source: https://shorturl.at/atFN2
