Buying a new car is never easy, and one of the most significant challenges is financing it. While there are various financing options available in the market, choosing the right one requires research and careful planning. One option that stands out is new car financing. In this article, we’ll discuss what new car financing is, how it works, how it differs from taking a loan, and the best new car financing options to help you finance your brand-new ride. We’ll also delve into the best apps, that offer new car financing options.

What is new car financing?

New Car Financing refers to a type of loan where the lender disburses the loan amount to the borrower to purchase a brand-new vehicle. The borrower agrees to pay back the borrowed amount along with interest over a specified period. New car financing offers flexibility to the borrower in terms of choosing the loan tenure, loan amount, and interest rates. It alleviates the financial burden of an outright purchase, allowing the borrower to purchase a brand-new car without having to part with a significant amount of money upfront.

How does new car financing work?

New Car Financing works in a straightforward process. The borrower selects a car of their choice, and the lender disburses the loan amount to the dealer or the borrower. The loan tenure and interest rates are agreed upon beforehand, and the borrower is expected to repay the loan amount as per the pre-decided terms.

Features of new car financing

1. Loan amount: The loan amount provided to people for buying a new car depends on various factors like credit score, income, repayment capacity, etc. Lenders can offer a loan amount starting from INR 50,000 and going up to the entire cost of the vehicle.

2. Interest rate: The interest rate charged on a new car loan depends on various factors like the applicant’s credit score, loan amount, repayment tenure, etc. People with a good credit score can expect a lower interest rate, making it easier for them to repay the loan.

3. Repayment tenure: The repayment tenure of a new car loan is generally longer than other types of loans and can range from one to seven years. Borrowers can choose a repayment tenure according to their repayment capacity.

4. Processing fee: Most lenders charge a processing fee that includes the cost of document verification, loan approval, and loan disbursement. The processing fee is a one-time fee, and its amount varies from lender to lender.

5. Prepayment and foreclosure charges: Some lenders levy prepayment and foreclosure charges on the new car loan. The prepayment charges are applicable when the borrower wants to make the full payment before the loan tenure ends. The foreclosure charges are applicable when the borrower wants to close the loan before the repayment tenure.

Benefits of new car financing

1. Affordable: New car financing is an affordable option for people who do not have the necessary funds to pay for a car upfront. Borrowers can repay the loan amount in small EMIs over a more extended period.

2. Flexible repayment options: Lenders offer flexible repayment options, allowing borrowers to select a repayment tenure according to their repayment capacity. With the provision of customized loan repayment options – such as EMI breaks, step-up or step-down EMIs, and bullet repayment – it becomes easier for borrowers to manage their finances accordingly.

3. No need for collateral: Unlike secured loans like home loans or gold loans, new car financing does not require any collateral. Car dealers can sell the vehicle in case the borrower is not able to repay the loan, and the lender does not seize any other assets.

4. Fast loan disbursal: With online lending platforms, new car financing can be disbursed within a few hours of loan approval. Applicants can complete the entire loan application process online, requiring no physical paperwork.

5. Credit score improvement: Timely repayment of the new car loan can help improve the borrower’s credit score, making it easier for them to avail other loans in the future.

Choosing the right lender for new car financing

Finding the right lender for new car financing can be a daunting task. It is important to compare different lenders’ interest rates and check their eligibility criteria before opting for one. Here are a few factors to keep in mind while choosing the right lender for new car financing:

1. Interest rate: Lenders offer different interest rates on new car loans. It is important to compare these rates and choose one that is affordable and easy to repay.

2. Loan tenure: The repayment tenure of a new car loan is a crucial factor to consider while choosing a lender. A longer tenure means lower EMIs, but it also means higher overall interest paid.

3. Processing fee: Some lenders charge a processing fee, which may range from 1-2% of the loan amount. It is important to check the processing fee charged by the lender and compare it with others before choosing one.

4. Customer support: Choosing a lender with excellent customer support can make the loan application process hassle-free and stress-free. Ensuring that the lender provides robust customer support with swift resolution to concerns is imperative.

How does new car financing compare to taking a traditional loan?

New car financing is different from taking a traditional loan when it comes to features, disbursals, and approvals. Here’s a comparative analysis of the two approaches:

Features: New car financing offers better features than traditional loans. The interest rates are usually lower, and the loan amounts are higher. The loan repayment period is also more extended, giving the borrower more time to repay the loan amount.

Disbursals: When it comes to disbursals, new car financing is faster than traditional loans. The lender typically disburses the loan amount within a few days after the loan has been approved, whereas traditional loans can take weeks or months for disbursement.

Approvals: New car financing also has faster approvals than traditional loans. The lender is more likely to approve a new car financing application, subject to fulfilling the lender’s criteria. Traditional loans, on the other hand, require a lot of paperwork, verification, and background checks, so the approval process can be much longer.

Best new car financing options

1. Bajaj Finserv App

The Bajaj Finserv App offers new car financing options that come with attractive interest rates, flexible loan tenures, and hassle-free documentation. The Bajaj Finserv App also offers a unique feature called a flexi-loan. The Flexi loan allows the borrower to withdraw funds as per their requirement from the approved loan amount. What’s more, the borrower only pays interest on the amount withdrawn, saving on interest costs.

2. HDFC Bank

HDFC Bank is one of the most trusted financial institutions in India. HDFC Bank offers new car financing options with attractive interest rates, flexible tenures, and a high loan amount. HDFC Bank also offers pre-approved offers, which makes the lending process faster.

3. State Bank of India

State Bank of India offers one of the best new car financing options with low-interest rates, flexible tenures, and easy documentation. SBI also offers a pre-approved loan option, which can help the borrower receive the loan amount quickly.

4. ICICI Bank

ICICI Bank is known for its excellent new car financing options, which come with flexible tenures, affordable interest rates, and high loan amounts. ICICI Bank also offers instant approvals and disbursals, making the process hassle-free.

Conclusion

New car financing offers a convenient way for prospective car buyers to purchase a brand-new car without having to pay a significant amount upfront. It allows for flexibility in loan tenure, affordable interest rates, and an easy lending process. When choosing a new car financing option, it’s essential to consider the interest rates, loan tenure, disbursal, and approval time. As we have seen, the Bajaj Finserv App stands out as an excellent option for new car financing, thanks to its flexible loan options, low-interest rates, and instant disbursals.