Debunking Myths About Used Car Loan

Debunking Myths About Used Car Loan

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The coronavirus pandemic has given rise to a new trend in the personal mobility of a person. As per the Society of Indian Automobile Manufacturers (SIAM) data,  the sale of used cars will record year-on-year growth of 10% by 2024.

Key Drivers

Some key drivers for the heightening used-car demand have been discussed below:

  • At the time of the introduction of GST, the GST rate on used motor vehicles was the same as the GST rates on new motor vehicles viz. 28%. However, the Government Notification No. 08/2018 – Central Tax (Rate) dated 25th January 2018 provided a huge relief for used motor vehicles by slashing the GST rates from 28% to 12% and 18% (as per the vehicle) effecting from 25th January 2018. This has directly impacted vehicle costs for dealers as well as end-users.
  • To control the emissions from motor vehicles, the Government initiated Bharat Stage Emission Standards (BSES) that shall be mandatorily complied with by all the vehicle manufacturers. The Times of India reported the predictions of SIAM that there is an apprehension of a rise of car prices to the tune of 7%-10% due to the introduction of this BSVI norm.
  • The organized sector, financial institutions, and a few auto manufacturers have set foot in the used-car market, changing consumers’ perspectives.
  • The availability of used-car loans is a significant catalyst in the growth of used-car sales.
  • The entry of corporate sector financiers in the used-car business has made used-car interest rates more affordable to consumers.

Debunking the Myths

Certain myths about used-car loans impact consumer behavior. In this section, let us look at them and debunk the common myths about used-car loans.

1.Banks Are The Best Used-Car Lenders

Banks usually impose higher used car loan interest rates. Also, a bank’s used-car loan eligibility criteria are more stringent than a new car’s. If you have a mediocre credit score, approaching a non-banking financial company (NBFC) may get your loans sanctioned at favourable terms. NBFCs are similar to banking companies but are more relaxed regarding eligibility and procedural aspects, thereby increasing their reach to a broader section of borrowers.

2.Finance Companies Restricted Only to Urban Areas

Non-banking finance companies are present in most Tier 2 and Tier 3 cities for used cars these days. In smaller towns, the NBFCs offer seamless and consumer-friendly services.

3.Finance Companies Do Not Offer Value-Added Services

The NBFCs offer end-to-end services, from providing a realistic valuation of the car and the loan at the best rates to getting your car insured. They also help manage and sort tax-related matters.

4.Used-Car Loan Aggregators Take Longer To Disburse

You can access the used-car loan EMI calculator online offered by used-car loan aggregators. It will help you monitor, evaluate and determine your monthly liability. Following this, you can apply online for a loan and enjoy the ride in your dream car.

5.Intermediaries, Like Brokers, Offer Best Services

No, you stand in a better position when you approach a lending institution directly, both regarding the ease of the process and interest rates. This eliminates any layer of intermediation and brokerage costs.

Also, you’ll have a clear idea of the deal on direct interaction with the NBFC.

6.Used-Car Loan Can Only Have A Single Borrower:

You can introduce a co-borrower for a used-car loan. The co-applicant will equally share the EMI with you, thus, reducing your liability.

Thus, if you contemplate buying a used car, it would be best to opt for an NBFC. They have competitive rates and ease of loan terms to turn your dream into a reality.

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