The second-hand car market has been booming in India. It was estimated that the business generated in the used car market for FY 18-19 was an astounding Rs 1 lakh crore. One of the reasons behind the exponential growth of the second-hand car market has been the availability of finance.
Buyers have a variety of choices when it comes to availing of second-hand car loans. However, before shortlisting it is imperative to make a comparative study of the used car market and the rate of interest for second-hand car loans in the market.
Here is a quick guide to get you a loan for a used car. Of late, lenders are ready to lend up to 95% of the value of the used car and it is has become a breeze to secure a second-hand car loan in India.
1. Check for the age of the car: When a buyer is considering a used car loan, it is important to understand the age of the car. The reason is no lender would be interested in financing an old car. If the car model that the buyer wishes to purchase is phased out from the market, the lender will hesitate to approve a second-hand car loan.
In the general case, a lender will provide finance if the car is 7 years old. The term of a used car loan determines the term of the loan. If your car is on the road for 2 years, the loan term will be 5 years. Whereas, a car that is 4 years old will fetch you a loan with a loan term of 3 years.
2. Check for the interest rate: The valuation expert of the lender checks for the kilometers covered and the model of the car. Based on the above factors, a value would be fixed for the pre-owned car. The lender will consider all these factors before giving a loan for a used car. The rate of interest for the loan depends on these three factors. The rate may oscillate between 9.5 to 17 %. The older the car gets, the higher will be the rate of interest of your second-hand car loan.
3. Approach a genuine, organized dealer: There are a large number of credible car dealers who will help you own newer model used cars. The cars they sell are in mint condition. This is because they scrutinize the automobile and repair faults or replace faulty parts. Furthermore, they sell the car after completing all the document formalities. In addition to that, their certificate ensures that the car is not a stolen one and has not had an accident in the recent past.
Getting a used car loan is very easy in this case as the trusted dealer gives a due diligence certificate. The lender can rely on this before extending a second-hand car loan to the customer.
Your dream to own a costly car comes true if you go for a pre-owned car. Nowadays, several lenders that extend used car loans that have made the second-hand car market attractive and profitable. Before deciding on which car to buy, go through the above-mentioned factors to avoid getting trapped in long term loans and very old cars.