Auto Financing: Make a Wise Choice

The growth of car sales is increasing by the day facilitated by the growth of banks and financial institutions. The concept of buying a car with a huge sum of money is not a trend anymore. Our society is gradually adapting to auto financing. According to industry reports, about 60% of the car sales made last year was based on loans. Nowadays, car loans are also available online with the aid of banks like The State Bank of India, HDFC Bank and ICICI bank. Car loans are also available for second hand cars offering customers numerous options. Even re-financing is also available. If a customer likes a car but does not like the terms and conditions of the loan, he/she is being offered the liberty to opt for a new loan replacing the old one.

Auto financing is primarily based on two schemes namely, margin money scheme and security deposit scheme. Margin money scheme involves payment of a percentage of the car price as down payment. The interest then is charged on the remaining amount taken from the bank as loan. The second scheme is based on a stipulated amount of money taken from the customer as a deposit. This money is later paid back to the customer with interest after the loan is repaid. Thus these loans are unsecured car loans. The customers don’t have to keep any property as a lease, which might be seized by the lender on failure to repay the loan.

The customers though must be alert while selecting the amount to be paid per installment. According to terms and conditions, the lender may seize the car if the customer fails to pay multiple installments. The rate of interest should also be considered. Thus like every other scheme, auto financing also has some drawbacks. Despite these drawbacks, it is fulfilling many dreams of owning a car.

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