• Car Loan for New Car or Car Loan for Used Car?

    Car Loan for a New Car vs Used Car
    Car Loan for a New Car vs 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.

    New Car Loan – Features

    As stated earlier, new car loans can be availed if you wish to buy a new car. The interest rates on new car loans range between 7.50% p.a. and 15.50% p.a. The interest rates on new car loans can be both fixed and floating. As the name suggests, your equated monthly instalments (EMIs) will be fixed throughout your loan tenure if you choose a fixed interest rate. On the other hand, if you choose a floating rate of interest, your interest rate may fluctuate with the change in market trends.

    Some of the features of new car loans have been listed below:

    • Makes buying a new car possible even if you do not have funds at the moment.
    • Some lenders offer new car loans for up to 100% of the car’s on-road price which means you do not have to make any down payment.
    • If you have a good credit score (above 750), lenders may offer you lower interest rate on car loans.
    • You do not have to provide any collateral to take a car loan.
    • You can buy a car of your choice by availing new car loans.
    • The processing of availing a new car loan is simple, hassle-free, and is quickly approved. The paperwork required is also minimal.
    • Most car loans availed for buying a new car offers the option of loan foreclosure/prepayment.

    Used Car Loan – Features

    A used car loan is ideal for you if you have been eyeing on buying a luxury car but you haven’t been able to afford it and you do not mind using a pre-owned car as long as it is in a good condition. With the pre-owned car market in India evolving to an extent where dealers ensure that the car they sell is verified and in good condition, is encouraging more and more people to purchase used cars. Also, many top banks and financial institutions in the country are offering used car loans at attractive interest rates.

    Before availing a car loan to buy a used car, you should ensure that the vehicle is not more than 5 years old because most lenders will not lend to you if the car is older than that.

    The interest rate on used car loans range between 9.80% p.a. and 16.80% p.a. while the repayment tenures range between 1 year and 5 years. Let us look at some of the other features of used car loans below:

    • You can afford a luxury car by availing a used car loan since used cars are relatively cheaper than the new ones.
    • Financing of up to 90% of the car’s valuation can be availed.
    • The loan application process is speedy and involves no hassle.
    • The maximum loan tenure offered on used car loans is 5 years.
    • Some lenders offer complete transfer support when you take a used car loan from them.

    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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