- Decide on how you will finance the purchase of the car. If you are planning to buy the car paying cash directly, then it is straightforward but if you plan to finance the car by a loan, then you will have to do some homework –
- Check which loan works best in your case-For example, car loan or a personal loan. You have to research on the loans available in the market. There are many websites where one can compare thoroughly.
- Check the processing fees. Some banks waive the processing fees. Check for not so apparent charges.
- Check the EMI that you have to pay on the loan on parameters like installment to be paid, quoted interest rate, effective interest rate (on which reducing balance method, the interest rate is calculated)
- Ensure that you are aware of the prepayment terms and conditions as some banks levy charges on prepayment and others have some stringent conditions around it.
- The car buyer HAS to insure the car. The auto insurance policy for a year is generally packaged within the purchase of the car. Check the terms and conditions of the insurance as to what is the coverage for example regarding third party insurance, No Claims bonus etc. If you are not satisfied with the coverage do not hesitate to ask for a different insurance cover than the one packaged along with the car by the dealer.
- Before you take the loan, think through all your Financial Assets. Currently, the Car Loan will come to you for interest rate of 10% +. You may have Financial Investments not earning you adequately & liquidating the same can actually reduce your Car Loan amount.
- Try & balance that Life Style perspective Vs. Financial implication. Can you go for a smaller or less costly car?
- Do you have any other source to borrow that will cost you less than the Car Loan?
Hope this helps you in making a smarter purchase!
Team Getting You Rich