There’s a used car to suit every pocket

Even those aspiring to a high-end model, but unable to afford a new one, can look for a pre-owned alternative in good condition

Like most Mumbaikars, Manasee Karnalkar, a privatesector employee in her thirties, is working from home currently. She is keen to buy a car in the near future. Says Karnalkar: “I want to avoid public transport in these times. I am looking for a value deal and will probably go for a used car.”

Many others are thinking along similar lines. Says Sunny Kataria, vice-president (auto), OLX India: “With the lockdown easing, daily listings of passenger vehicles have grown six times and user interest (daily replies) 3.5 times.”

People want to steer clear of public transport for fear of infection. A more evolved pre-owned car market has also led to more people gravitating towards it. Says Hemant Dalvi, a Mumbai-based auto expert: “These days many people buy a pre-owned car which they use for four-five years. They then sell it and graduate to a new car.” In the past, people held on to their vehicles for 7-10 years or more. That is no longer the case. The higher churn means it is possible to get a car in good condition at a reasonable price. Auto companies’ used car portals like Maruti Suzuki True Value and Mahindra First Choice, used car portals of other players, and local dealers offer a plethora of choices. The used car market caters to a range of budgets. Says Dalvi: “Bus commuters are willing to buy cars in the range of ~35,000-1 lakh, metro travellers spend ~3-5 lakh, while Ola and Uber commuters are ready to spend ~5 lakh or more.”

Do the due diligence: Ensure that all the paperwork is in place. Look for the lender’s no-objection (NOC) certificate, proof of loan repaid in full, insurance papers, no-claim bonus (NCB), service records, hypothecation status, etc.

When a car is purchased on loan, it is hypothecated to the lender. Ideally, the owner's name should be on the registration document, not the bank's. Also, ask for the original invoice. Do the due diligence on the car’s quality. Says Kataria: “Get the car you plan to buy evaluated by a mechanic, a family member or a friend who understands cars.” There are companies that inspect vehicles and issue a certificate. Ask the seller to get such an inspection done.

It's best to choose a car with a fully-documented service history. Some dealerships offer warranties on their used cars. Avoid buying obsolete or discontinued models, or a vehicle with very few or too many kilometres on the odometer. A seven-year-old car that has run for just 20,000 km may have problems due to inactivity. Finally, take the vehicle for a spin.

Interest rate is higher: The interest rate is higher and the loan amount lower on a used car loan. Says Sahil Arora, director and group head, investments, Paisabazaar.com: "These loans are riskier and hence the interest rates are generally higher than on new car loans.” Do the numbers, or else your old car with higher interest rates might prove costlier than a new vehicle.

For value-conscious buyers:

Value-conscious buyers looking for higher-end vehicles may scout the used-car market. Says Adhil Shetty, chief executive officer, Bankbazaar: “A second-hand car is an option if you want to buy a premium vehicle without stretching your finances too much. Segment C and D sedans, for instance, lose as much as 40 per cent of their value in the first year alone. A premium model retailing new for almost ~15 lakh can be bought for about ~9.5 lakh in the seconds market. For those looking to acquire a highend car, a well-maintained pre-owned car can be a good alternative.” Used cars can also give excellent value for money to the midrange (~4-9 lakh) buyer, provided he can do the due diligence.

Those taking a loan to buy a used car should check out the total cost, including cost of maintenance, and others.

Don’t over-stretch:

Those who are financially comfortable may well go for a new vehicle. Even if you don’t have the entire amount, you can shell out just 20 per cent and take a loan for the balance 80 per cent. Interest rates are low right now.

New car buyers should stick to the 20/4/10 rule. Make a down payment of at least 20 per cent of the cost. Finance the car for no more than four years. And do not let your total monthly expense on the vehicle—including principal, interest and insurance—exceed 10 per cent of your gross income. Buy a car with good resale value. Says Arora: “Factor in your repayment capacity carefully while selecting the loan tenor. While a shorter tenor will result i n lower interest cost, do not sacrifice liquidity and contribution to crucial financial goals by choosing an aggressive repayment schedule.”

Shop across lenders to get a good deal on the car loan. Says Shetty: “Getting a preapproved loan from a lender of your choice will guarantee faster processing. It will also provide you with leverage while negotiating with the car dealer. You will be able to bargain for more add-ons or fewer fees.”

Never take a car loan at the dealer’s as you will unnecessarily pay a 1-2 per cent commission to him on the loan. Negotiate with the dealer for freebies. Finally, you can reduce the car’s cost by ~8,000-10,000 by opting for a non-metallic colour.

“I want to avoid public transport and am looking for a value deal. I will probably go for a used car"

MANASEE KARNALKAR

Employee with a private-sector company in Mumbai