5 Important Things To Consider In Car Financing
These days car financing is widely being offered by banks. A reason for this is that the banks see it as a viable need of salaried persons who can benefit from this and pay the cost in monthly installments instead of having to burn through a hole in their personal savings by paying in a lump sum.
However, this can be a long term commitment of usually 5-7 years and thus you can easily pay off the cost of your car in installments as much as your income allows you after deducting your household expenditures. In this article we will talk about 5 important things that you should definitely keep in mind when considering auto finance.
While thinking of getting a car financed, most probably one would probably go to the same bank one uses for their other services out of satisfaction, loyalty or perhaps ease. However it’s a good idea to look around what other banks offer and then compare all the specific charges, offers and Terms & Conditions to get a better idea of who offers the best auto finance.
This is also known as mark-up and is charged as a percentage on the amount that the bank lends you to in lieu of car financing. This rate can be fixed or changed yearly if kept as a floating rate. However it’s best to decide a fixed rate because car finance is a long term commitment and if the interest rate goes up then it could become a problem in the long run and you could end up paying quite a bit more.
As part of car financing, it is must to have your car insured and insurance policies usually range from 3-6% of the total cost of your car per annum. The insurance cost depends on whether a tracker is installed or not which depends on your car being “hot” i.e those models that are most prone to theft or not. This is usually paid in advance at the start of each year. When it comes to insurance usually the bank has partnerships with insurance companies but it’s also a good idea to see if any insurance providers of your choice offer a better rate.
This is the total duration of your car financing. Usually banks offer a maximum of 7 years for this. However one thing to keep in mind is that this duration is based upon the year of manufacture of your car. Thus if you buy a 2013 car in 2016 then the total duration of your financing shall last till 2020 i.e the next 4 years as your car is already 3 years old. One more thing to note here is that the lesser the duration the lesser the interest rate shall be hence if you can pay a bit more in lesser duration then it’s a wise idea to do so.
This is the total amount that the bank decides to lend you for your car and this depends on whether your car is new or used and local or imported. Banks usually offer up to a maximum of 85% of the total value of the car and the rest has to be paid by you as down payment. It’s always a good idea to pay as much down payment as you comfortably can to lessen the burden and duration of installments. These are some vital points to be kept in mind before opting for auto finance. If you have any comments or feedback please send us at firstname.lastname@example.org