Planning to get a car loan?

        What is the right  way to buy a car? Check out these key considerations before going for it!

 

              ’Rome is not built in a day’. None of the person from a middle class family plans to buy a car in one night. It is usually a planned decision, at least a decision made 6 months earlier.

 

What happens when you are buying a car in EMI? Let us consider that you are getting a vehicle loan of Rs. 5,00,000 for a tenure of 4 years with 12% interest rate. With Rs.1,00,000 as initial payment, buying a vehicle that costs Rs.6,00,000 by now.

 

At the end of 4 years, the total amount paid for the EMI will be Rs.7,40,000. Will you be able to sell the car for 7,40,000 after 4 years? Definitely not! Approximately, you might have driven 60,000 km in 4 years and your vehicle may worth between 3-4 lakhs. It is sure that you cannot sell it for more than 4 lakhs.

On the other hand, you are buying a house in EMI and after 10 years, the value of your house would worth the amount you have paid as  EMI. The accumulation of land rate & house worth will somehow equals the accumulation of interest & loan amount you pay.

EMI’s are always not the right choices. So, what is the best way to buy a car? How we can escape from the debts. 

• As you will be planning in advance to buy a car, try to minimize the loan amount by paying higher initial payment. 
• Don’t feel ashamed to buy a second handed car, if your usage is less and you drive your car out of the portico once in a month. 
• There is another brilliant idea, you may consider: postpone the buying date but pay for it earlier!
  
  

 

    Seems little confused? Pay in advance and buy the car later. Chit fund is a right way to save your money. Plan to buy a car in advance and start paying for the due. Consider paying for a ‘pot’ of Rs.5,00,000 for a period of 25 months. Monthly due will be Rs.20,000 but after dividends will be around 15,000 over the majority of the tenure. 

    You may be paying a sum of Rs.3-3.5 Lakhs but able to get 4.5-5 Lakhs at the end of the tenure. By postponing the purchase of a vehicle two years later, you save around 4-4.5 lakhs.

    Getting a loan of Rs.5,00,000 and paying Rs.7,50,000 will cost you an EMI around Rs.15,000. Paying 15,000 earlier and buying a car with the 5 lakhs costs you 3,00,000 - 3,50,000. Eventually, you save 4 lakhs by making a right decision. 

     Chit funds are legal in India and the norms were derived through ‘The Chit Funds Act’ in 1982. There are over 10,000 registered chit funds in India and you can choose your right option.  Moreover, saving is not a burden as how you feel while paying an EMI in return.