Buying a car becomes necessary in the young generation of India. In the last decade, car means the symbol of luxury and extra expenses for a family. The more preference given to buying a house as the necessary to run a life. The perception of people have changed over years, now most of them feel that owning a car is necessary for the life and it takes preference over buying a house. But, how they are financing the purchase of a car is not well prepared by them. However, car becomes necessary, it is not an assets for you in the future. It is depreciable asset and can not consider under the investment category. Lets discuss on what is the ideal financial plan to buy a car. If you like this article, please subscribe to our future articles here.
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Cost of Car
Once you have decided to buy a new car, lets finalize the budget for buying a car. The idea for the budget is depends on the financial status of the buyer. Then start identifying the make and model of the car in the show rooms. Note that the budget and actual cost of the car may differ because it is difficult to estimate the exact price of the car without talking to the car dealers. So, prepared for the minor difference in the budget. Another important point is that, if you are buying the car in loan, don’t go for the higher end models with higher budget, you will have to pay the higher EMI in the future.
Cash or Loan
If you have decided the budget for the car, next plan should be how to finance your car?. It is always recommended to buy the car using the cash if you have it in the savings. Don’t have it in mind that car should be bought in loan. You go for loan only when you don’t have the cash in hand. As I have already pointed out, car is depreciable asset.
Prepare for the downpayment
If you don’t have the cash, then only option to buy the car is through car loans. Most of the banks offer car loans up to the 85% value of the car. The remaining amount has to be put as the down payment by the buyer. You have to plan for saving the money for down payment. If you have the surplus cash, put all the money in the down payment and reduce the loan amount. It will significantly reduce the loan duration. If you are paying for the long duration, the outgo of the interest payment would be very high. In the normal scenario, banks would offer the car loan in the period ranging from 4 years to 7 years. Not more than that.
Don’t take the personal loans
It is the biggest mistake done by many of us, taking the personal loans or using the credit card for financing the car. If you have it in your mind, don’t buy a car now. The interest rates for personal loans and credit cards are very high.
Plan for other expenses
I have noted that, many of us while buying a car, they are not keeping in mind that there are lot of expenses associated with maintaining a car. One of the recurring expenses is buying an insurance. If you buy a car worth Rs. 10 lacs, the first year insurance premium would be approx. Rs. 30000. It is not a small amount to ignore. Apart from the insurance, there are lot of expenses for servicing the car. think about all the expenses before buying a car.
I hope this article would have provided some basic idea about planning to buy a car. If you have interesting experience with you care loans or anything, please post it in the comments section. If you like the article, subscribe to our future articles here.