Most of us wish to have a car as an asset to our name. And having that dream realised is easier with a car loan because let us face it – cars are pricey. So it will really be an added benefit if we can learn to reduce that EMI of the loan and at the same time negotiate the loan.
Top 4 Tips to Negotiate
Here is How it Can be Done
This applies to not just the loan terms but to the price as well. In fact, the foremost thing to be done is to negotiate on the price of the car you are about to buy. Then you can bother about the loan interest rates and the processing fee that comes along with it.
The car dealers selling you the cars actually keep quite a good margin on the car sales and have a lot of leeway in that aspect. So before you finalise on a deal you need to pay a visit to at least 5 dealers.
You may often find them reluctant to offer you discounts (and they usually are). So to circumvent that what you can do is try getting as many accessories and services for your car as you can, for free.
Get free leather seat covers or rust painting or even engine lamination for free. Also, try not buying insurance from the dealer. You can save a lot by buying insurance directly instead of getting it via the dealer.
2. Processing fee
You need to negotiate on the processing fee. If the loan is for a short term then even a very high-interest rate is not much of a problem. Say for example – for a loan of 5 lacs running for a duration of 5 years, the difference of 10% and 10.5% is a mere Rs. 123 a month and so you pay an extra Rs. 7406 over a span of 5 years. So this might not seem like a big deal.
But if you have to pay a processing fee of Rs. 5000 (plus tax) you see the difference going up as much as the 0.5% of the interest rate just discussed. So apart from negotiating the price of the car, negotiate the processing fee as well (yes, you can do that).
Make sure that the tenure for the loan repayment is a smaller one. The simple math that explains this is that the longer you pay the more you pay the interest.
The loan cost remains constant but with increasing time the loan interest keeps on increasing and that can never be good.
So instead of going for 7-8 years, try cutting it short to 4-5 years. You will save a lot in the long run with this small compromise.
There are chances when you want to pre-pay a car loan to save on interest costs. But often loan agreements are so designed that there may be prepayment penalty clauses attached and that is a difficult front to argue. So choosing the lender wisely is important.
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