We all want a car for better traveling options, security, and last but not least a social status. A lot of people think that buying a big car or a car from famous brands is the definition of success. So anyway, now that you are taking a loan and the EMIs are in the payable range you think that it will be even better if you buy a bigger better car. It will only increase your EMIs a little bit but you will get a nicer car. Financially is this a good decision to do so?
Remember the car is a solid asset in which you invest money. But unlike other assets that increase in value over time and you can sell them for a bigger price than you bought them, the car loses its value over time. In fact, the car starts losing its value the moment you drive that thing out of the showroom. It also comes with maintenance costs and diesel and petrol costs. Now you need to pay the EMIs for that car but you also need to pay for its maintenance and petrol. If the car has some minor scratches or anything you also need to pay to get them repaired. If you get the car in a minor crash then again you need to pay for its repairs. These costs are sometimes but not always covered by insurance. Also, sometimes insurance covers only half the costs for repairs.
You can also invest the money that you are paying more for a nicer car else were and gain more interest out of it. After some years of paying the installments constantly people get fed up with a large portion of their salary going towards a car. If they sell the car at that time then the costs are not even enough to pay back the principal amount with interest. More loan means a bigger tenure and that also means more interest rates over the life of the tenure. Car loan even though has lower interest rates if the loan goes on for a longer duration then that would put you in a bigger pile of debt.
So, at times if you don’t have any responsibilities and a good income source then you can choose to pay bigger installments over a short period of time. This way you are paying a less interest rate and not actually paying more money than the value of your car. Also to find a middle ground you can buy a car whose model is been on the market for more than 3 to 5 years and this way you can get a new car but with fewer costs upfront. Also, try to put at least some money in down payments so that you don’t have to pay too much money in installments.
After a few years when you need a larger and nicer car, you can simply sell this one and put that as a down payment towards your new car and your financial condition will also be better by then so it will be good for the health of your bank account. Capital small finance bank car loan has great transfer policies. Always remember that all loans come with the risk associated with them and should only be taken if you know that you will be able to pay it back. Make use of an online EMI calculator and calculate the EMI. See if you can afford that EMI and only then apply for the loan.
Your credit score will also be better by then as you have made timely payments on your loan. A great way to boost your credit score is to borrow money and pay it back on time. After making timely payments on time your credit score is in a much better state than it was before. This better credit score will also get you a good deal on the new loan with lower car loan interest rates and comfortable tenure.
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