How To Get The Best Rates On Your Car Loan

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pic by comedy_nose

For Car Loan Calculators, Go to the bottom of the page

Why is this important?

There are 30-odd car manufacturers offering cars in India.

44-odd scheduled banks and a rash of other sundry lenders trying to push various cars and loan packages.

This is a buyer's paradise.

If you negotiate well, you could even get something at below PLR - Prime Lending Rate!

Tips To Get The Best Car Loan

  1. Buy from an authorized dealer - Authorized dealers of car companies have a better commission / incentive plan and hence can offer better rates.  Most banks will like to work with such recognized agents and the the car company financial muscle may also pay a part.  Some of the car companies actually have their own finance arms which will give you a better rate if you buy their won company models.
  2. Buy when the company announces a scheme - this depends on the time of the year, the market sentiment and of course the stock lying in the company godowns or the number of cars in the parking lot waiting to be sold.  The company announces schemes to clear this lot because when the car is manufactured the year and the month are stamped on the chassis and the engine.  As soon as the year finishes the model is a year old and loses anything from 10 to 30% of its sell value.
  3. Shop around - let the car sellers known you are considering other models and you should.  but more importantly, once you have selected the car you want, let the banks and the dealers know you are shopping around.  Competition will make them offer better rates.
  4. Bargain, then bargain some more - It is all about asking.  Ask and more often than not you will get it.  Bargain on the down payment, the interest rate, the principal and the interest reduction every month.
  5. Ask registration, insurance, processing fees to be included - This is deregieur in India now.  Most of them will offer it to you, but for the few who try and make a sale without having to give out the freebies, ask.
  6. Shop for a popular brand - the more popular the brand the easier it is to get your loan application approved.
  7. Upgrade your previous loan - Sometimes it is better to continue your old loan rather than take up a new one.  The old one has an established credit history and line and maybe you even got it at a lesser interest rate.  consider topping it.  speak to your bank and they may be more amenable to it than giving you a new loan.
  8. Take as less a loan as possible - This is a no-brainer. the lesser the loan amount, the lesser the repayment and the EMIs
  9. Show healthy income statements - Customers who have a good credit history, and have a healthy financial status will get not only larger amounts but better rates.  I know the one who needs it most, pays the highest.  Also, since you have a good credit history, more banks will offer you a loan and hence more options for you to chose from.
  10. Commercial is expensive than personal - Commercial vehicle/ car loans are more expensive than car loans for personal use.  consider the cost implication.
  11. Check pre-payment costs -You may take a loan today and want to pay it sooner than the payment plan decided when you took the loan.  Most banks charge a fee for pre-payment of the loan (this is to make up for the loss of interest income).  Check how much this is and you may want to opt for a bank that offers a lower pre-payment option if you fell you will be able to repay before time.

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Gagan Modi profile image

Gagan Modi 5 years ago from Delhi, India

You can also calculate Car Loan Eligibility Calculator at:-

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