Owning a car is no longer a luxury; it has become a necessity. So, people consider buying a car as per their requirements and budget for their daily commute. However, not everyone can afford a new car because of the cost. So, they opt for a used car as it is relatively cheaper than a new vehicle.
Today, the used car market has become quite organized. Moreover, the possibility to buy a pre-owned vehicle through digital portals and people’s urge of saving money by not purchasing new cars has increased the sales of the used cars. The growing demand for used luxury cars is another reason for the rising sales of the pre-owned car market.
So, if you wish to purchase a pre-owned car with a used car loan, you need to have knowledge of the various fees, which financial institutions levy.
Some of the used car loan charges include:
- Processing fee and documentation charges
A processing fee is a one-time cost that the lender charges for processing the loan. Documentation charges are the expenses related to handling the documents. Some financial institutions charge a processing fee of approximately INR 6,000 or 1% of the loan value, whichever is lower. Documentation charges may be around INR 500.
- Foreclosure charges
If you decide to pay the entire loan before the used car finance tenure is over, the financial institution imposes foreclosure charges. This amount is around 5% of the outstanding principal value.
- Prepayment charges
If you pay a part of your loan in advance, the financial institution levies prepayment charges. This charge is nearly 5% of the prepayment value.
- Check bounce / instrument return charge
If your check bounces or the financial institution returns it to you due to issues like insufficient funds in your bank account or wrong information provided, the lender levies a check bounce/instrument charge. The average charge per instance is INR 500.
- Penal interest
If you are not paying the Equated Monthly Installments (EMIs) of your used car loan as per the contract, the lender charges penal interest rates according to the terms and conditions. This amount can be around 2% per month, and it is over and above the used car loan interest rates.
Do note that these are the approximate figures, and they may vary among financial providers. So, check with your lender about the accurate amounts of these charges while applying for a loan. Mahindra Finance offers reasonable used car loan rates. Visit its website to check used car loan eligibility.