Apart from this they'll also be required to pay the processing fees, file charges and the taxes involved. So, they'll end up repaying Rs 12,60,112 for a loan of Rs 10 lakh. They'll pay an EMI of Rs 21,002 per month - paying total interest worth Rs 2,60,112 to the bank over the course of 5 years. Let's understand this better with an example -įor instance, if a car-buyers takes a car loan of Rs 10 lakh, at the average prevalent car loan interest rate of 9.5% for the most common duration of 60 months. If they're able to finance a car at a low interest rate, they may be able to invest their savings in stocks, real estate, or other assets that have the potential to earn higher returns. Most importantly, financing a new car allows the borrower to use their savings for other investments that have a higher return on investment. And depending on the lender, they may be able to choose between different interest rates, payment terms, and down payment options.īenefits of financing a car: Opportunity cost The loan recipient will know exactly how much they need to pay each month, which can help them plan finances more effectively. This can be particularly beneficial if the loan recipient plans to take a mortgage or other types of loans in the near future.īenefits of financing a car: Better budgetingįinancing a new car also allows to budget expenses better. As long as they loan recipient makes payments on time, they'll be able to demonstrate to lenders that they're a responsible borrower. This means that they can get a nicer car that has more features, better performance, and higher safety ratings.īenefits of financing a car: Building creditįinancing a new car can also helps build credit score. One of the biggest advantages of financing a new car is that it allows the car-buyer to purchase a car that they might not be able to afford with cash upfront. And this can also be of significant advantage if they plan to take another loan, like a home loan, and want to maintain maximum loan eligibility.īenefits of financing a car: More affordable upfront cost They can use their cash payment as leverage to negotiate a lower price or get additional features, accessories or extended warranty added to the car for free.īenefits of buying car with savings: Zero debtīuying a new car with savings means that the car-buyer will not have to take on any debt. While paying for a car with cash, car-buyers also have better negotiating power with the car dealer. Benefits of buying car with savings: Better negotiating power
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