The market is flooded with offers from car manufacturers as well as financiers with various kinds of car loans. The competition among car manufacturers and the financiers has come as a boon for the customer who now has a wide range of choice in car loans from which he can try to extract the best possible deal. Special schemes launched from time to time provide greater flexibility and overall savings making them more attractive than the standard auto loans available from the financiers. But the real problem lies in understanding the details of a car loan scheme. Unlike the home loans here the rates are not the true indicator of the deal. There are several other factors which influence the total cost to the customer.
The dealers have tie ups with finance companies in order to provide lucrative offers which the customers cannot overlook. In such cases the financier proposes a rate at which it intends to lend the money and the dealer then proposes the percentage of commission that he ready to forgo in order to reduce interest burden on customer which further eased by offerings from the manufacturer directly in order to boost sales.
Correct Evaluation of Offers
In order to get the best deal from a car loan the customer has to look deeper into the real value of the offer being made. At times dealers announce interest rates of 7% which has many hidden charges making the actual cost to customer even higher than a 12% car loan.
However currently there are genuine good deals available in terms of dealer subsidy and manufacturer offers. For example if the dealer offers a subsidy of Rs. 20000 on a car loan of Rs. 200000/- for 5 years at 13% rate of interest it may not sound so impressive. If however the same is calculated in terms of reduction in financial burden of EMIs, the same loan would appear to be at 9.5% rate of interest which appears more impressive. In this case the actual EMI will down from Rs 6,753 to Rs 6,303 by taking into account the Rs. 20000 subsidy.
Search for the Best Deal
Once the model of the car and the amount of loan required has been finalized by the customer it is time to search for the best deal available on that from different dealers. Before that the customer should be clear about the EMI implications of the loan that he is looking for.
Fixing the EMI will provide an accurate idea of the expected cash outflow which makes the job comparison of deals realistic. Now the customer should insist on cash discounts from the dealers instead of falling into the trap of lower interest loans which may actually be against the best interest of the customer. For example if one is buying a car of Rs. 500000 out of which he is paying Rs. 100000 as down payment and the rest is being availed as loan, he should insist on getting a cash discount on that down payment rather a loan at lower rate of interest. This idea will work out as a better deal in the loan run for the customer.