Car Loan for New Car or Car Loan for Used Car?
If you are planning to take a car loan to buy a car, there is a slight chance that you are confused about whether you should take a new car loan or used car loan. A new car loan will enable you to buy a brand-new car while a used car loan can be used to buy a pre-owned car.
Many top lenders in the country offer car loans for buying new cars as well as second-hand cars. Both these types of loans come with their benefits which we shall discuss in the below sections.
Car Loan Comparison: New Car vs Used Car
Parameter | New Car Loan | Used Car Loan |
Eligible Vehicle | Brand new cars only | Pre-owned cars (typically up to 5 years old) |
Loan Amount | Up to 100% of ex-showroom price | Up to 90% of car's current market value |
Interest Rates | 7.50% - 15.50% p.a. | 9.80% - 16.80% p.a. |
Loan Tenure | Up to 7 years | Up to 5 years |
Processing Fee | 0.5% - 2% of loan amount | 1% - 3% of loan amount |
Down Payment | Optional (some lenders offer 100% financing) | Typically 10-20% required |
Documentation | Minimal paperwork | Additional vehicle inspection documents |
Prepayment Charges | Usually 2-5% of outstanding amount | Typically higher than new car loans |
Insurance | Mandatory comprehensive policy | Mandatory comprehensive policy |
Depreciation | Higher (20-30% in first year) | Lower (already depreciated) |
Comparison of Interest Rates on New Car Loan and Used Car Loan
Name of the Bank | New Car Loan Interest Rate (p.a.) | Used Car Loan Interest Rate (p.a.) |
State Bank of India | 9.00% to 12.25% | 11.00% to 12.00% |
Axis Bank | 9.05% to 11.30% | 14.80% to 16.80% |
ICICI Bank | 9.30% to 12.85% | 14.25% |
HDFC Bank | 9.50% to 10.25% | 13.75% to 16% |
United Bank of India | 8.80% to 8.85% | 9.60% |
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