Before taking a car loan you must also consider liquidating some of your Fixed deposits which give your around 3.5%-4% returns (9.5%-6%inflation) per annum. Here are some of the advantages and disadvatages of takin a loan IMO -
Advantages-
1. If you do not have the liquid cash it enables you to buy the car at the first place.
2. Income Tax benefits- Interest component per year is reduced from your Income
3. Allows you to have substantial cash reserves which may be essential in emergency situations
Disadvantages-
1. You end up paying substantial amounts more towards interest.
2. The interest rates have shot up in the last one year and for several people the EMIs have become prohibitive. |