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New Car Funding: L...

May 24, 2015 10:05

It doesn’t matter if you are hired by someone or hiring someone to do a job, the task of new car funding is equally cumbersome and confusing for all. In India, there are mainly three car funding options that one can go for:

  • Cash – An easy options from all aspects except for availability. In most of the cases, it always lacks by a few thousands or lakhs from required amount. So, if you can afford to go for it, good enough, and if not, well then congratulations, you are the reason other financing options were invented.

  • Overdraft – An easier option only requires a specific amount in your bank account. Those with multiple FDs carry an edge in this respect, but again unless the interest you are earning is equal or around 6%, there is no use of availing new car loan over your fixed deposits. It is not easy to have that high interest rate given the income tax payment and all other types of payments.

  • Car Loan – One of the most common and reputed car funding options. Despite its loopholes, it is one of the most sought-after options by all.

So, the confusing question is – which one is the most viable option among all? Cash is no doubt the best one, but a dream for most. Overdraft can be an option but a lot of calculation needs to be included. Imagine the 2-3% of your total deposit as loan, along with, you wouldn’t be allowed to break your FD or use deposited money for any other purpose unless you have paid the loan. Even if it is an emergency, you cannot touch your deposits, plus there is a payment obligation for the loan you took. And all of this depends over the principle amount which may or may not be enough for raising required amount of money.

Under this scenario, new car loan option seems the most suitable one. But, again it comes with its own complications. You are paying interest for an asset whose value is depreciating with every passing day. So, it is not one way but you are losing your money both ways. So, give it a serious thought before opting for any of car funding options. Take some expert opinion and discuss with your well-wishers. And see if you can find a hybrid option, partly cash payment and partly loan. This way, you will be able optimize your losses vs gains.

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