When purchasing a car, buyers usually opt for an auto loan from a lender that has a partnership with the dealer. It's convenient for the car owner as the dealer provides all services in one place, and they don't have to chase banks for it.
But lenders could charge you a higher rate if you take a loan from at the showroom as they have to pass on a commission to the dealer.
Do talk and negotiate an auto loan with lenders which have a representative at the showroom. However, do compare the quoted rates online.
If there is a rate difference, the dealer may try to sweeten the deal by offering a discount on the car value. When taking a car loan, don't just compare the interest rates. Calculate the total interest outgo. You can easily do it online at many intermediary websites. Choose a loan where your total interest outgo is the lowest.
There are two common tricks that lenders use to confuse borrowers. First, check whether the loan is on 'ex-showroom' price or 'on-road' price. This would affect the amount of loan you can borrow.
Sometimes, the lender may ask you to pay one EMI (equated monthly instalment ) upfront. Here's how it works. The lender may sanction ₹5 lakh loan where the EMI is, say, ₹12,000. Instead of giving the total loan amount, the lender will disburse ₹4.88 lakh, charging you one upfront EMI. Beware of such practices.
Interest rate and tenure are not the only two factors to consider. Also, take a look at the processing fee and other charges, such as those that the lender will levy on prepayment, foreclosure and documentation.
A car is a depreciating asset. Taking a bigger loan may not be the best thing to do. Try your best to go for a shorter-period loan. The shorter the tenure, the lower is the interest outgo.
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