Five tips to negotiate on a car loan

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Buying a car can be an extremely emotional decision, especially if it is first vehicle that you are purchasing. As a prospective buyer, you obviously wish to get the best possible deal on a car loan if you are going in for one. Here are some useful tips on car loan negotiation if you are in pursuit of a set of wheels to call your own.

Negotiate the price of the car, not your EMI

When you have identified a dealer and are all ready to opt for financing of the vehicle, you will be assigned a sales representative who will be friendly and convince you that he is on “your side” and ask you questions like “how much you are willing to pay each month?” or “what would you like your monthly payment to be?”. But before you are super impressed with the helpfulness of the salesman, take a step back.

Do not fall for the trick where the price becomes subject to your payment capability. What you should be negotiating is the price of the car. Bear in mind that each dealer makes a considerable margin on the sale of each car. The best way to do it is to approach multiple dealers for the same car and check out the best price of the car on offer and not who is giving you the maximum EMI. At the end of the day, if the total price of your car comes down, so does the need for a loan.

Decide your own lender

Often times a prospective car buyer opts for the loan that the dealer offers in partnership with banks where they end up shelling out a lot more than they would have to had they done some research themselves. If you wish to take a car loan, start the other way round. Compare the car loan rates of various banks and check your own eligibility. The most popular car loans in India are HDFC car loan and SBI car loan, for the many benefits they offer, but do your own due diligence and decide upon a car loan that is best suited to your needs than opting for one that the dealer suggests.

Opt for the best rate of interest

Car loan interest rates are obviously the major consideration to make before taking a car loan. Whether you decide upon the HDFC car loan or the SBI car loan or wish to take a car loan from any other lender you would want the very best interest rates. A credit score of over 750 will come in handy when you are looking for the best interest rates as a higher CIBIL score gives you the power to negotiate the rate of interest with the prospective lenders.

Go for a short loan tenure

Once again, do not be taken in by the creative ways that the car dealers come up with to make borrowers pay the lowest EMI each month. Bear in mind that the lower your EMI goes, the higher is your loan tenure. SBI car loan offers a tenure of as long as seven years! However, you need to keep in mind that a car is a depreciating asset and loses value each year. Therefore, try and keep the tenure as short as possible and do not exceed a 5-year loan term.

Do not finance the cost of add-ons

Did you know that more than 30% of the profits that car dealers make come from aftermarket add -ons? Extended warranties and other embellishments for your car such as rust proofing, paint sealant will come much cheaper if you take in the aftermarket if you feel the need to get it done at all. Including them in your financing not only increases your interest costs but adds to the profits of the dealer. Thus if a dealer is trying get you to include add-ons to your financing, say a polite no!

Thus as you can see there are many nitty gritties of car purchase that your dealer would rather not have you know. However if you go through a lender and opt for a HDFC car loan or an SBI car loan, you have a better head start already. Keeping the above mentioned factors in mind will help you make a better choice!

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