Buying a car by Loan

Car sickness is the feeling buyer gets when the monthly car payment is due. There is good reason for it, as unlike home loan payments, the equated monthly installments (EMIs) towards car go for a fast depreciating asset.

However, some smart moves can help buyer get a better deal on his car loan and soften monthly EMIs, besides giving buyer what he actually wants.

Decide what car to buy and do not leave it to the salesman. Select the car first and then look for finance. Buyer must identify his requirements, budget and whether he can really need features like a four-wheel drive. Otherwise, buyer might end up buying a car that does not have the features buyer need, or shelling out extra money for no real purpose.

A businessman RF had his priorities clear when he decided to buy a car. He needed a spacious car with good air-conditioning for personal use as well as for airport pick-up and dropping services.
His focus helped him zero down on the car he finally bought — Toyota Innova. He initially chose four cars — Toyota Innova, Chevrolet Tavera, Nissan X-Trail and Ford Endeavour. After comparing prices and features he settled on Innova.

Nissan X-trail and Ford Endeavour were out of his budget, and the significant extra feature these cars had was the four-wheel drive, which he could do without in the city. He chose Innova over Travera as he felt that as far as looks, design and comfort were concerned, the former had an edge.

Buyer must spend sufficient time researching the new car he wants to buy and also spend an equal amount of time shopping for the finance. Buyer can take time, months if need be, and be an aggressive and price-oriented buyer. Buyer budget should not be stretched even a few hundred rupees extra EMI every month can pinch over the years.

Customers should decide on the car they want go in for after looking at the overall budget. They should look for a combination of down payment and EMI that they can easily manage.
Avoid dealer’s finance. It may be hassle free and offer huge discounts, but the fact is that interest rates charged by them are almost invariably higher. Pay maximum amount of the price as down payment.

Remember, a car is a depreciating asset and will give buyer no returns. So, the less buyer pay as interest, the better off buyer is. Check out the rates of direct selling agents of banks, or even banks themselves. Only when buyer has shopped around considerably, he can zero down on the best deal.
RF did just that — shopped around and got a good deal for his Toyota Innova. During his research, he found out that different dealers had different deals to offer and that they varied widely. He bargained extensively and the final deal got him a much lower interest rate than the one that was quoted first.
Focus on the total price interest repayment amount than just on the interest rate. Be clear about the other charges for nameplate, registration and insurance.

Buyer must try to get low rates of interest and bigger discounts, not go for the model with a waitlist, but a car that has been in the market for some time.

When a new model comes in, there is a huge demand for it and dealers are eager to sell off older models. It is easy to find out which car is moving slow. It might not be the car of buyer’s choice or fetch buyer the highest resale value, but will be a good car to own nonetheless.
For example, right now, buyer get Rs 5,000 discount for a Suzuki Swift, but Rs 15,000 on a Maruti [Get Quote] Wagon R.

When buyer have zeroed down on a car, shoot for the slowest selling variant. Most of the time a particular variant, which is usually the top-end one, is not the fastest moving. So the dealer will be eager to push it and buyer can negotiate more and get a better bargain. Buyer can get a lot of additional stuff at a price a bit higher than a lower variant.

Look at net acquisition cost. While trading off buyer’s old car for a new one, try to get a good bargain for old car, the dealer will normally tend to jack up the price of the new car. If buyer wants a big discount on the new car, he will push down the price of buyer’s trade-in.

Either way, he will try to keep his margin fat. Buyer’s aim would be to slim it down and thereby reduce his net cost of acquisition. So, buyer should look for the highest price for the old car and the lowest price for the new one. If buyer’s new car dealer is not giving buyer the best price, sell somewhere else. Some minor repairs and a thorough cleaning might cost buyer a little bit of money, but will help buyer get a much better price for his old car.

If buyer’s dealer tries to lure buyer with free goodies stereo, floor mats, or seat covers he must not go for it. They will, more often than not, be of questionable quality. When the dealer puts a price on them to show buyer what a good bargain buyer is getting, buyer must ask for a cash discount of the same amount so that his loan burden comes down.

Keep these smart moves in mind so that when buyer drives out of the showroom, he is a happy man behind the wheels who is not likely to experience ‘car sickness’ in the years to come.