If you’re considering to buy a car, the first question that pops up is what to buy? New or old? This constant struggle can be intimidating and end you up with the wrong choice. The next thing which is considered is talking to close family and friends and then seeking their opinion. They would always like you to buy a used car in place of a new car. They think that costs can be easily cut down. In a new car, the insurance cover is high whereas, in an old car, maintenance is high. The process to get a car loan needs to be well thought out to get disbursals on time.
There are some serious factors that need to be considered in mind before choosing any loan type:
Let’s compare the two: New Car Loan Vs Old Car Loan
- Loan amount
In the case of a new car, there’s no old car history which means that everything comes with guaranteed parts. At least these parts come with the assurance to stay. This is exactly why one tries to take a well thought out decision. The loan amount in the case of an old car is much lower compared to the new car finance. Some banks provide 100% of the ex-showroom price while the others provide upto 80% on an old car.
The loan amount sanctioned will be much higher in a new car loan for nearly about 7 years while upto 5 years in an old car loan.
- Interest rates
In case of used cars, the risk quotient is much higher compared to the new cars. But with old cars, this interest rate is much regulated. The interest rate could range between 11.50% to 12.50% on the car loan.
Precisely, you end up paying more in case of an old car whereas a new car loan is much more pocket-friendly. On a loan amount of 10 lac, the interest rate of 15% is just too high in comparison to a new car interest slab.
If the interest rate and period are lower, the overall installments will be lower too. With the smaller amounts, the car loan will be lower too.