Your First Preferred Used Car
A car purchase is always a significant event for everyone in India, always comes with high emotional attachment associated with it. Whether it’s a new or used car, mass-market or premium, your vehicle represents a major lifetime aspiration and investment decision. Continue reading Used Car financing….
Today every new car buyer is well informed and knows what he/she wants when it comes to the purchase of a car. Be it the brand, features, pricing, after sales service, completion, social images and value for money, the due credit for consumer awareness goes to media and the internet.
Used Car: Purchase and Perception
However the case is a bit different for a used car buyer and the crucial parameter to him whether the car he wants to buy is accident free/or not, its age/model/year of manufacturing ,kilometer driven, status of ownership (first/second or third owner) and proper documentation ( registration, tax, up to date insurance, pollution clearance) available for transfer.
Should I lease or finance my used car?
Well, the question is simple to ask but a little complex to answer. As a customer, you require to go through some basic information on both the options (leasing and financing) and the prevailing trend in the Indian market. This will help you to have drawn your own independent conclusion on the subject and becoming the proud owner of your first used car.
What is car leasing
It is the use/leasing of a car for a fixed time period at an agreed amount of money for the usage with certain other agreed terms. The time period and agreed amount are determined by the leasing company. After the agreed time period, the user has to return the car to the leasing company or he may purchase the same for the residual value (as determined by the leasing company).
From the customer point of view, the biggest attraction in leasing option per se is the lower monthly instalment/payment as you are only paying for the depreciation of the car during the usage period only. The leasing option enables the customer to drive his dream car with some first-time minimum payment followed by monthly lease rental payment, as per the agreed terms with the possibility of up gradation for a better car in future, should he desire for.
Loans/financing options on Used Car :
It is a loan facility extended to the potential customers interested in buying used cars / pre-owned cars. Pre-owned cars always offer value for money, the slow rate of depreciation, lower insurance, registration charges, and lower loan amount to be borrowed from the finance company.
It is perhaps the best option for any lower middle and middle-class buyers aspiring to be the proud owner of their first car.
Shopping for a used car may be a bit tedious process for the first time buyers and you as an aspirant customer require being involved in the process.
It requires a good amount of research and decision-making if you’re looking forward to striking a good deal on a great pre-owned car.
A major aspect of shopping for a used car is the financing part. Because the cost of a used car is significantly lower than a new car, it’s often possible to procure the car outright with cash – avoiding long financing terms resulting in saving some of your money.
However though most used car buyers do end up financing their cars, you may be tempted to drop some cash for an outright purchase to pick up a great used car without worrying about repayment.
This is indeed a not so easy decision for you being the customer and to make things easier for you we have listed out the advantages vis a vis disadvantage of financing for a used vehicle.
Advantages: If you avail the used car financing
For good reason, this is the best options and most common practices in India and it comes with quite a few customer-centric benefits explained below.
– Low Down Payment
Used cars can be purchased with a very low down payment – (approx) 10%-20% of the value of the car and sometime you may even get a 0% down payment in some cases.
–Very Reasonable APRs
No matter whatever your credit rating is, you can still secure a reasonable APR on a used car. Even people with not so favourable credit rating succeeds in getting reasonable terms when financing a car loan because banks can simply repossess the car in case of non-payment thus reducing the risk of financing.
–Enhance Your Credit Rating
An auto loan is a good way to initiate an enhancement of your credit rating especially if you have had not so favourable credit rating in the market.
– Keep your precious Savings for the rainy days
Investing your savings on a large cash purchase is not a good idea even if it is a car. Life happens to be always uncertain and you may be out of luck tomorrow in case you require a quick injection of cash for any other future contingency.
Financing on regular assets like your” used car” can keep your savings intact for unexpected situations or emergencies in future.
–You always can opt for a Better used Car
-Your savings are always limited and If you make a cash down payment for the car, you’re always restricted to a smaller budget and you can’t exceed it.
However, if you avail the financing option for used your car, you may afford to buy a better-used car (better brands, more features and high-end models…etc ) without making the complete payment at once.
On the flip side, there are few inherent drawbacks to the financing option in comparison to “cash down” options. You generally tend to pay a higher overall cost because of the monthly interest attached to it and that’s only natural as nothing comes free in life.
You also do not have much leverage in terms of negotiation of the annual interest as primarily it is a call of the finance companies who are extending you the loan. And finally you only become the proud owner of the car, only once the complete loan amount along with all the interest charges is paid off.
In spite of these little but natural drawbacks, the customers in India prefer to go in for “loans” from the professional financier, dealers while picking up their first car/used car as it meets their aspiration to become the proud owner of a car fast without blowing their entire savings ( as cash down ).
Normally the market offers a standard and attractive interest rates and lower upfront costs. A used car in good condition always adds up to your/ family convenience, comfort, lifestyle and social image.
Buying Vs Leasing: What is the right choice for you?
|Leasing – An option comes with several constraints||Buying through financing – Peace of mind|
|Age old leased car always creates problems and increase your maintenance & fuel bills, snatching your driving pleasure.
|You are always careful and maintain the car since it is your own lifelong assets.|
|With a leased car, you always pay an acquisition fee extra||No such things|
|End to end warranty does not come with the pre-owned cars.
|You always can check up with the OEM for an extended warranty.|
|You never own the vehicle||You’ll have the complete ownership of the used car after the payment of your loan liabilities.
|Once you cross the allotted mileage, you are penalized thus costing money||You can drive your car as many miles as you’d want.
|If you decide to buy out the lease at the end of the contract, you would end up paying much more||You can build up trade-in or resale value
|You cannot modify the vehicle beyond factory specification||can customize your vehicle the way you like
|In most cases, you must purchase the gap insurance extra., otherwise, If the car is stolen or you total it, your insurance will only reimburse you for the car’s market value, which might not cover what you still owe on your lease||No such expenses required such to cover any risk.|
|You have the option of driving your car for years to spread out the cost
|Leasing is somewhat like a rented accommodation and you never have the “ feel good” factor of being a proud owner||You only become the “proud owner” of your choicest used car and enhance your social image always.|
The comparison table above would certainly help the readers /prospective buyers to conclude and decide whether to go in for” leasing” option or “ buying through financing “ option.
Certain finer points include in favour of ” Buying through financing options” are that besides the ” ownership” of an asset, your annual insurance cost for your purchased car is standard and reasonable and in case of a leased car, it is much more higher.
Moreover, when you lease a car, you have a mindset of not taking proper care (since you are not the owner) of the vehicle, resulting from a higher maintenance expense.
The similar parallel can be drawn from the fact that the rented property/home is always abused and on the contrary, one tends to take the best care of his own property/home.
Though you require to have a stable monthly income for both the leasing and buying (till the loan is paid off) option. In case of losing your job or closure of your business, you can always fix a resale value of the pre-owned car ( purchased through financing) , and pass it on to the next buyer and settle your account with the financier whereas you do not have such flexibility, if you had taken the car under ” lease agreement”.
It is indeed hard to get out of the lease contract unless you pay a steep fee.
On a personal note, I like to conclude that Buying a used car ( through financing option) is always a better deal than leasing for one primary reason: Once you pay off your auto loan, the car is “free forever” and the longer you keep it in the garage, the more you save on it . On the contrary, if you lease a car for your whole life, you’ll be making monthly lease payments for the rest of your life. For more information on Car Finance, may refer to Wikipedia.
So if you are the aspirant customer looking forward to driving your first car, please do the necessary research on the car/model/OEM, determine your budget and paying off capacity and followed by the window shopping around.
Once you zero in on your choice (model/features/colours), visit an established used car dealer, negotiate the final price, get the financing done and ride back home with you’re the dream car and be the proud owner forever for your choicest first car.
My blog-post is addressed to potential car buyers preferring to settle down for their first car ( used car) in life.
The images used in this post are mostly from Pixabay ( free images).
The images are used in order to make the post-reading more audience-friendly and I do not claim ownership of any images used in the post.