Purchasing a four-wheeler is no longer just a status symbol; instead, it has become a necessity in today’s time-pressed life. In densely populated cities, commuting on local means of transport is challenging, and many prefer the comforts of a private automobile instead.

However, before looking for the latest car models in the market, one must remember that buying a car is a significant investment. Many people end up taking car loans at a high rate of interest, which can result in high monthly EMIs.

Interestingly, the interest rate on car loans is not the only factor that influences the EMI amount. Other factors like the payment plan, tenure, model, insurance, taxes, price, resale value, customisations, features, and servicing also impacts the EMI.

If you are also considering taking a car loan, make sure you follow the below-mentioned tips to ensure that your loan doesn’t become a liability:

Factors to Consider Before Taking a Car Loan

Factors to Consider Before Taking a Car Loan

  1. Finalise your budget
  2. Select whether to buy a new and pre-owned car
  3. Choose the desired car specifications
  4. Calculate the resale value of the car
  5. Scrutinise thoroughly before making an investment
  6. Plan your finances efficiently
  7. Go for a test drive
  8. Negotiate the prices and terms
  9. Focus on the total cost rather than monthly payments
  10. Have an estimate of the total car premium costs
  11. Avoid purchasing any add-ons
  12. Refrain from purchasing an extended warranty along with the car
  13. Get a mechanic to check a pre-owned car before buying it
  • Finalise your budget

The very first step before selecting a car model is to decide the amount which you can allocate for such a big investment. It is, however, not just a one-time investment.

Along with paying a lump sum at the purchase, other expenses including its maintenance, fuel cost, insurance premiums, etc. also need to be factored in. Therefore, set an upper limit and decide on a monthly amount that you are willing to spend on your car.

  • Select whether to buy a new and pre-owned car

After finalising the budget, it is important to decide whether you wish to purchase a second-hand car or a new model. Generally, people opt for used cars as their first car, and once they get the hang of driving, they buy a new car.

However, it is imperative to understand that although a second-hand car may fit in the budget, it can have higher maintenance cost than a new one. Therefore one must analyse their budget and then plan an estimated cost of having a personal car.

  • Choose the desired car specifications

With ample of automobile brands in the market today, it isn’t hard to find several that can fulfill all the requirements of the buyer. The foremost thing here is that the car must fit the buyer’s budget, lifestyle, and taste.

So, before looking for car models, a buyer needs to pen down their desired list of specifications such as colour, safety features, sunroof, heated seats, surround system, automated gear, performance level, and seating. Besides, you must also select whether you want to go for a petrol run car or diesel engine. This will make it easy for the buyer to narrow down some the cars having these specifications as well as fits the budget.

  • Calculate the resale value of the car

Before purchasing a car, it is important to have an estimated idea about the resale value of the car. Due to a powerful engine, brand value, and superior fuel efficiency, some cars have higher resale value than others.

Besides, maintenance of the car is one of the major concerns of the buyers, and as such, they should purchase a model which has ample service centres nearby along with the availability of spare parts. So before investing, it is best to check the resale value as it can be beneficial during a financial crisis or while planning to purchase an upgraded version.

  • Scrutinise thoroughly before making an investment

Before dealing with the car dealers, a buyer must be well aware of the Manufacturer’s Suggested Retail Price (MSRP) of a particular model. This is the amount which the dealer pays to the car manufacturer. So once this amount is known, a buyer can easily negotiate to buy the car at a good price.

Besides, it is best to select cars which won’t take up more than 5% of your monthly expenses.

  • Plan your finances efficiently

Most buyers often decide in haste and end up paying hefty car loan EMIs every month. However, planning your finances smartly can help save adequate money.

Before visiting a car dealer, must look you must look into their financing options, tally the interest rates offered by car dealers, banks and private organizations and then select the financing option that offers best rates and can be repaid easily.

Look for multiple options while purchasing a car and negotiate with various dealers; this makes it easier for buyers to understand the current market scenario and helps them get the best rates.

  • Go for a test drive

Even after doing thorough research on the most desired car brand, it is imperative to go for a test drive before buying it. During a test drive, a person gets an idea about the comfort level, performance, convenience, steering, brakes, handling, etc.

Besides, one can also judge the safety features of the car, so ensure a safe and smooth ride.

  • Negotiate the prices and terms

A personal car is one of the most valuable possessions of a person; therefore, you must try to avail the best rates and negotiate its terms and price to get the best deal possible.

However, a buyer must be confident while negotiating and must never hesitate to back out from an unpleasant deal. Compare the prices of your favourite cars before you reach the store to make a wiser decision.

  • Focus on the total cost rather than monthly payments

One of the most common mistakes which buyers make is that they get easily swayed by numbers without actually understanding their significance. Most customers get lured towards a lucrative “low-cost” monthly EMI deal, but in actual they end up paying a much higher amount in total.

Thus, it would be best if you focused on the total cost of the car as monthly installments often have several hidden costs such as taxes, dealership charges, delivery costs, car preparation, etc. Unless a buyer enquires about these charges, he/she is kept in the dark by the dealers. If your dealership is also facilitating the car loan agreement, make sure you read the agreement carefully before signing it.

  • Have an estimate of the total car premium costs

Purchasing a four-wheeler is a big investment which has other hidden costs as well. One such is the insurance cost, which largely affects the total valuation of a car.

It is thus, beneficial to consider the insurance charges along with the car cost. Often sports cars have premium insurance while other cars can have regular insurance plans. Also remember to factor in the taxes, surcharges, and import fees, if applicable.

  • Avoid purchasing any add-ons

Refrain from purchasing any add-ons for the car as it increases the cost of the car. Often to gain higher commission from the sales price, the salesman lures the buyers to opt for add-ons such as rust proofing, VIN etching, rear camera, heated seats, and dealership maintenance plan.

Remember, most expensive add-ons in cars serve no real utility and often impede the vehicle’s functionality by draining the battery. Especially if you are purchasing a second-hand car, it makes little sense to spend on avoidable add-ons. Remember, you will already be paying a monthly EMI; so avoid such expenses.

  • Refrain from purchasing an extended warranty along with the car

Buyers often find it lucrative to purchase extended warranties which talk about offering higher coverage but, in reality, offer minimal benefits. Besides, these extended warranties impose higher charges on the buyers and don’t cover any mechanical failures.

Thus, while buying a new car, a buyer must look for the manufacturer’s warranty, which covers the majority of the damaged costs. However, for a pre-owned car, the buyer can check whether it has an active manufacturer’s warranty or else save the money to pay for its repairs and maintenance in the long run.

  • Get a mechanic to check a pre-owned car before buying it

A buyer is not always a car expert, and as such, buying a pre-owned car at a lucrative price can become a nightmare in the future. So before finalising the deal, a buyer can get a thorough inspection done by a mechanic. They can easily state whether it is beneficial to purchase a pre-owned car or will it bring additional costs in the future due to its mechanical issues. This can also aid the buyer in negotiating its value with the dealer. Similarly, it can help you decide the amount to pay as down payment and choose an apt car loan amount.

Financial planning is a must before taking a car loan, and buyers should check out the best EMI plans to ensure that they can repay the loan easily. Buying a car is akin to making an investment in your lifestyle.

Thus, it is imperative to select the right car that has higher durability, is pocket-friendly, matches one’s requirements, and has a low maintenance cost.

There are ample ways to get an affordable car loan in today’s age; however, make sure you choose the loan amount carefully, select the most suitable EMI plan and compare the services of various lenders before making the final decisions.