According to a market research report by Mordor Intelligence, the Indian used-car market was valued at USD 24.24 billion in 2019. Also, it is expected to grow at a CAGR of 15.12% between 2020 and 2025.People are interested in buying used cars for various reasons. Firstly, it is budget-friendly and gives a new driver an opportunity to get some hands-on training. Additionally, the pandemic scenario has made owning a private car a necessity. In such instances, it would be wiser to invest in a well-maintained and reasonably-priced used car than buying a new one.
If you are postponing your plans to get a used car due to financial constraints, then taking a second hand car loan could be a good idea. Here are some reasons for why choosing a used car over a new one is a better plan and the benefits of taking a used-car loan in India:
- Value for Money
A used car is a good value for money. It makes car purchase affordable and you need not wait for the desired model.Today, you have a plethora of options in the used cars segment. Many online marketplaces offer used cars at highly competitive prices based on your city. It has become very easy to contact the seller and conduct a background check.
- Save Interest
With a used-car loan, you need not divert your savings towards buying a car, which could have the case if you were planning to buy a premium new car. A used car offers similar utilities as a new car but at a much lower price. As there is less principal involved, interest amount is lower than that of a new car loan. Depending on your finances, you may opt for a used car that was recently bought by the seller and has not seen much use. A well-maintained car can be as good as new.
- Competitive Interest Rates
The online marketplaces have made it very easy to compare different types of used cars based on your location. You can easily check for financing options through these channels, which will give you insights about the trending interest rates. Most of the times, interest would be influenced by many parameters such as the type of car, age, brand, current market price etc. Although interest rates are usually higher for a second hand car loan, you can avail a competitive rate by doing some homework beforehand.
- Flexible Terms and Less Paperwork
In addition to traditional lenders, many non-traditional financing and fintech companies have become active across the financing market. Availing a car loan is no longer a distant dream. With a proper financial hygiene, it is possible to avail a second hand car loan at flexible terms within minutes of applying. That too, with less documentation work. Additionally, an increased demand for contact less banking and financing options has made availing a loan easier. Once you have shortlisted the car of your choice and completed the background check of the seller, you are ready to approach a financer to discuss the loan terms.
- Less Insurance Cost
One of the biggest benefits of buying a second hand car loan is the savings on additional costs that come with a new car loan. For instance, the cost of insurance is higher for a new car as its market value is higher. Remember, a car that has more safety features will reduce the interest premium. Another factor that can influence the insurance cost is your location. If your area is theft-prone then that may have an impact on your overall insurance cost.
Are you still confused between a used-car loan and a new-car loan? There is no one-solution-fits-all. The answer will entirely depend on your priorities and other financial commitments. If you have enough liquidity for your dream car then go for it. However, if you do not wish to burn holes in your pockets but still need a car for daily use or frequent long-distance traveling, then a used car may be a better option. But before getting a used car make sure you do a thorough background check and ensure the title of the used car is clear. Check whether the owner has all documents in place and has maintained the car in a good state. And remember, a car is a depreciable asset and not an investment. Do consider the maintenance cost too.