It may be the dream of the billions in India to buy the car, and that only multiplies when you see over dozens of cars ranging from luxurious to budget hitting the roads each year. Looking at such glittering launch of the models, you may be making plans to own those. You could check around the savings that have been accumulated over the years, see the salary or business income you have in place and assess your repayment capacity before availing the loan to buy the car. But after scrutinizing all, you find your eligibility falling way short of the requirements. Then, you cast your mind to the option of getting the second hand car or say the used car on loan. Yes, it is a fact that you can get the used car at a much lesser price owing to the sharp depreciation that affects the value of the vehicle. But, while approaching the lender for used car loan, you will have to deal with a plethora of issues that are discussed below.
Used car loan costlier than for new ones
You can avail used car loan from several lenders like HDFC Bank, State Bank of India (SBI), ICICI Bank, Bank of Baroda, Magma Fincorp, Tata Capital, etc. Unlike having finance upto 90% of the ex-showroom price of the new car, you can get only 75% of the value of used car as loan. Plus, on an average, the used car loan may cost you 3-5% more than the one for a new car. The reason being the higher interest rate in the range of 13-17% on used car compared to 10-12% for a new model.
Lenders don’t offer loan on cars used more than 5 years
After approaching the lender for the loan, a valuation expert will be sent for calculating the value of the used car you may have opted for. The valuation will be based on several factors such as car condition, vehicle model, the amount of distance run, etc. The next hurdle is the amount of lending you can get from the bank or other financial institutions, which decide the same based on the valuation report. The combination of the age of the car and the loan tenure must not exceed seven years. For instance-If you have opted for a car used for three years, you can get the loan for a period of four years. On a 5-year old car, you can get the finance for two years. You can’t find lender for a car used for over 5 years. In addition, you can’t find any lender for the phased out car.
CIBIL Score also plays a crucial role to decide your eligibility for the used car loan. And if it is found that the CIBIL Score is low, your application for used car loan can be denied. CIBIL Score gets lowered on account of delayed payment with respect to credit cards and other loans.