The Indian automobile industry entered the Bharat Stage VI(BS-VI) era in April 2020, wherein two-wheelers and four-wheelers have to follow stringent emission norms. This will potentially increase the price of newer vehicles due to the additional technology. Moreover, due to this scenario, the Indian used car market will drive further growth in sales.
The second-hand vehicle segment accounts for about 18% of the total market. During FY 2019-20, 4.4 million pre-owned vehicles were registered against an estimated 2.8 million new car registrations.According to the forecast, the organized pre-owned car segment will grow at a compound annual growth rate (CAGR) of 22.79% during 2020–25.
If you have been delaying your decision to buy a new four-wheeler due to high costs, you can opt for a used vehicle. In case you still do not have the entire amount to buy a pre-owned vehicle, consider used car finance.
How does a used car loan work?
With this loan, you can afford a pre-owned car, which is significantly less expensive than a new vehicle. This is because the insurance cost and depreciation for used cars are lower than new cars.
The procedure to avail of a used car loan is easy. Firstly, you need to check theeligibility criteria, which include minimum and maximum age, income requirements, and employment stability. Once you determine your eligibility, fill the application form, and submit some basic documents. These include:
- Income, address, and identity proof
- Copy of the registration certificate book
- Bank statement
- Insurance policy
- Valuation from an authorized agent
After you submit the documents, the lender will assess your application according to their used car loan eligibility norms. After verification, the lender approves the loan request and disburses the funds to the dealer.
Benefits of a used car loan
- Higher loan amount
Contrary to common perception, lenders may grant a loan of up to 90% of the pre-owned car value. The loan amount depends on the model, its condition, age, and your repayment capacity. Sometimes, lenders may also provide up to 100% of the value.
- Flexibility in terms
Depending on your requirements, you may receive flexible second-hand car loan terms, such as amount, tenure, and EquatedMonthlyInstallment (EMI) option. The tenure may range from one year to five years. You have the facility to pay the EMI through post-dated checks, or electronic clearance service (ECS). Alternatively, you can give your bank an instruction to set automated payments from your bank account. This ensures you do not miss the EMI date.
- Affordable interest rates
Generally, used car loan interest rates are higher than new car finance rates. However, several leading financial institutions offer competitive rates, which are lower than various other types of unsecured loans, making it an economical option.
In addition to banks, several non-banking finance companies (NBFCs) like Mahindra Finance offer loans to buy a pre-owned car. The lender offers a loan to any individual (salaried or self-employed) who is 21 years or older at a nominal interest rate. Additionally, you may avail of a loan for a vehicle that is up to 10 years in age, allowing you to choose from a wider range of cars.
When you are buying a second-hand car, make it a point that you do not miss a good deal. With a reputed lender, the entire procedure is quick and hassle-free, ensuring you get the money at the earliest and drive your dream car home.