Are you planning to buy your first car in the next few days or the latest sedan that has been recently launched? But before you finalise the deal, do you want to check the various loan options available that will help you to achieve the dream of driving that car you were thinking of buying.
Negotiating a car loan is not as easy as it looks, as dealers tend to include various discounts offered by the manufacturers and financiers in the interest rate offered to the buyer of the car.
You may come across various advertisements in the newspapers which say that you can buy a Volkswagen Polo for 8,000 or buy a Honda city for 10,000. It sounds very attractive, but is it real?
The truth is discovered only when you decide to check with the dealer. You will find that the claims made are real, but the initial lump sum payment would be large. For once if you think that you can manage the down payment but when you ask them the interest rate, the dealer tells you it is 11% and you wonder, how come it is cheaper than a home loan you got just sometime back? You interrogate further and discover that actually all the cash discounts which you would have got otherwise were built in the interest rates and thus the lower rate. By now you are no longer sure what to do and how much more you should believe the car dealer.
Car loans or car financing has become one of the most complex loan products, as most of the dealers tend to include various discounts which otherwise can be taken as cash discounts for the car. And if you don't know what to do in such a case, you may not get the best deal. To negotiate for the best car loan, here is a step-by-step process:
DECIDE ON THE CAR
Before talking about the loan details, first decide the car you want to buy as different cars have different interest rates and it may happen that the car you want to buy has a different interest rate than what was advertised when you visit the dealer.
DECIDE THE AMOUNT & TENURE
You can get a loan on the car for 80-100% of the ex-showroom price of the car. The down payment ratio entirely depends on the lenders and also the car model. So you also need to decide on the amount of loan you are looking out for as the interest rate may vary on the quantum of the loan you are looking and the loan tenure.
NOW, SHOP FOR EMIs
Do some window-shopping over the internet or banks of the dealer for the given loan amount and tenure you have thought of and freeze on the lowest EMI offered to you.
NEXT, NEGOTIATE
The lender will charge you a processing fee while processing your loan. Negotiate hard on the processing fee, as there is a huge possibility of this being waived off.
NEGOTIATE THE CASH DISCOUNTS
Then, start negotiating for cash discounts (yes, they are back) that can be adjusted against your down payment. The DSAs/ dealers will offer to reduce the EMIs, but resist the temptation and insist on a cash discount. Also, the dealer/DSA will offer accessories in lieu of cash discount; again, resist and insist on cash discount.
NEGOTIATE FOR OTHER FREEBIES
Once you know that you have reached the cash discount limit, you can negotiate with the dealer for small freebies on car accessories such as car mats, boot mats etc.
SEAL THE BEST INSURANCE DEAL
Don't forget to transfer your no-claim bonus on the insurance policy you have on your old car to the new car if you have a claim-free record with your previous car. Also, car insurance premiums can vary widely, so negotiate hard on the insurance premium. If you follow the above then, you may buy the car you always wanted to buy in the economical way by choosing a car loan that suits you the best.
Happy Investing!!
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