Financing Basics

Financing Basics
	You're sitting in the dealership when the salesperson asks, "So, how are you going to finance your new car?" The question leaves you a little confused. What is he really asking? Getting finance at a good rate needn't be daunting and doesn't need the financial acumen of a chartered accountant. Don't be the subject of high interest rates on car loans. Let AutoIndia.com and our partners help you finance your next car loan today. Find the best rates and coverage for your car loan through our partnerships with online finance companies. Here you will be able to find and compare the best rates to fit your budget for your car loan. Organized and institutional auto finance has come into its own with the coming in age of the 90s. Their services are being marketed aggressively and imaginatively, loans sanctioned quickly and formalities completed within a day or two. In a recent research it was found that the total outstanding auto loan book at the end of March 2004 was Rs 34,100 crore (Rs 341 billion) and is expected to have risen to Rs 43,780 crore (Rs 437.8 billion) at the end of March 2005. The total disbursements in 2003-04 were Rs 22,700 crore (Rs 227 billion) and are estimated to have risen to Rs 26,700 crore (Rs 267 billion) in 2004-05. For the average loan seeker, however, deciding on which loan to take, on what terms, whether to go to the financier or the bank, the marketing jargons, the dealers to choose -afford a veritable dilemma. In such a scenario, it would be much better if you were a well - informed customer and knew what was in store for you. We hope this page will go a long way in clearing those cobwebs that had you flummoxed. Taking a loan amounts to your committing yourself to regular payments for a while, till you pay off your amount you have loaned that is. On the plus side, loans offer you the chance of buying a vehicle when you cannot afford to buy it upfront. Financially too, it is a viable offer. Generally the financiers offer 80% of the total amount of the vehicle as loan. Keeping this in mind, if a vehicle costs Rs. 2.25 lakh today, you will receive a loan of Rs. 1.80 lakh. At the current rate of interest at 16%, you will have to repay Rs. 6,330 for the next 36 months. Alternatively, saving the same amount of money saved would get an interest of 12% and it would be 30 months before you bought the vehicle. By 30 months, your investment amounts to roughly Rs. 2,20,000 which will still be 80% of its value at that time, assuming its price has shot up to Rs. 2.75 lakh by now. The big difference, however is, that had you taken that loan, it would have been in your possession 3 years earlier. So, going back to the salesperson's question, "How are you going to finance your new car?" your answer could be one of three things: "I want to buy the car." "I will be paying cash for the car." Let's look in more detail at each of these financing options so you can know what to expect at the dealership:
	"I want to buy the car."
	If you decide to buy the car and you want the dealership to help you finance it, you will be asked to fill out an application. A loan will be arranged through the dealership's preferred institution based on the negotiated price of the car and related expenses (sales tax, registration and licensing fees). Loaning money is big business, and most auto manufacturers have their own companies to arrange loans You will probably be asked how quickly you want to pay off your new car. Most auto loans are from three to five years -- 36 to 60 monthly payments. Different lengths of time can be arranged, if desired. Obviously, the longer you take to pay off the loan, the lower the payments will be. In addition, the amount of your monthly payment will depend on the interest rate, the length of the loan and the amount of your down payment. Keep in mind that the dealership will urge you to make a large down payment. While you are paying off the balance you owe on your car, the lending institution will hold the car's title. Once all the payments are made, the car's title is sent to you and you finally own the car.
	"I will be paying cash for the car."
	Paying cash for a new car makes the transaction very simple -- all you need to do is negotiate the price of the car and then write the dealer a check for this amount. This removes several variables from the negotiation process: the down payment, the interest rate and the monthly payment. Negotiating in this manner means the dealership can't disguise the true cost of the car.
	Interest & EMIs on Car Loans
	Loan for new Car Financiers Interest Rates Min EMI for 3yr loan/Rs1 lakh Min EMI for 5yr loan/Rs1 lakh ICICI Bank 11%-13% 3274 2174 HDFC Bank 10.5%-12% 3222 2131 SBI 9.75%-10.25% 3227 2125 Citibank 11%-12.5% 3150 2200 ABN Amro 11%-12.5% 3246 2155 Sundaram Fin 7%-11.5% 3200 2220 Loan for Used Car Financiers Interest Rates Min EMI for 3yr loan/Rs1 lakh Min EMI for 5yr loan/Rs1 lakh ICICC Bank 16%-18% 3516 2432 HDFC Bank 17% 3516 2451 Citibank 16%-18% 3550 2600 ABN Amro 17% 3516 2450 Sundaram Fin 14.5% 3400
	Disclaimer: These figures are approximations, that can differ from city to city and for different car models. Financial offers are also guided by the financiers' deals with the car makers.