Things to consider when taking out a loan for a used car

K. ARAVID 

 

Sales of new cars in India have been on the rise in the last few months. Used car sales are also growing by 15-18 per cent. According to various banks, bank lending for used cars has increased by 12 per cent to 18 per cent.

 

There are a few things to keep in mind before buying a used car. If you are buying a used car with a loan, you need to be extra careful.

 

The first thing to do before buying a used car is to check all the documents carefully. Make sure the registration certificate (RC) is in the name of the person selling the car. Banks and financial institutions give out loans only after verifying the authenticity of the car’s records. In addition to checking the records, they will also evaluate the car according to their own criteria.

 

The value of a car is determined by factors such as its use, the number of times ownership has been transferred, and mileage. Pricing is not based on car age alone. For example, if the mileage of a one-year-old car exceeds 50,000 km, the use of another car of the same model with the same age may be only 10,000 km and so the price of the two will be different.

 

Cars over 10 years old are generally not subject to credit. Similarly, most lenders will pay off the loan by the time the car is 10 years old. For example, a car that is seven years old can get a maximum loan of three years. Some banks specify that the car can be up to eight years old.

 

The interest rate on a used car loan is higher than the loan on a new car. This is between 2 per cent and 5 per cent higher in different banks. Considering this, you have to decide whether to take a loan to buy a used car or not. If you have a good credit score, you can ask for an interest reduction.