[sameerg]

Originally Posted by anto1212

I went to Skoda Chennai Showroom.

Dealer said If I do the full payment, I might get IT notice regarding the source of funds, etc. He suggested going for a Loan for a smooth process.

Is this true?

Should not be the case. It's not like you are paying cash. Payment would go through bank and hence the money is anyways sitting in a bank account attached to your pan card. But then logic does not always work in this country.

My guess is that dealer is pushing you toward loan as there may be some commission that they may get on the loan.

[hareshjethwani]

Originally Posted by anto1212

I went to Skoda Chennai Showroom.

Dealer said If I do the full payment, I might get IT notice regarding the source of funds, etc. He suggested going for a Loan for a smooth process.

Is this true?

Shouldn't be any issue. It's not a very high value and no cash involved.

[NotanF1driver]

Originally Posted by anto1212

I went to Skoda Chennai Showroom.

Dealer said If I do the full payment, I might get IT notice regarding the source of funds, etc. He suggested going for a Loan for a smooth process.

Is this true?

Okay, this is a bit tricky. IT Department has it's own means and ways to identify potential tax evaders. One of them is high value purchases like cars. As far as I know, they do some analytic procedures over these transactions and identify potentials. This is not a blanket approach - For example, if your gross total income as per last IT return is 25L and you are spending some 15 lakhs outright on a car, it might not be flagged. But if your income is just 6 lakhs in the IT return and end up spending 15L on a car, it might be picked. This means car value to income ratio is what is given importance. I know of a case where a notice was served when a Vento was purchased outright.

It is not a cause of concern, since you can ask a practicing CA to reply to the notice. You have not done anything illegal, a notice is a query on what you have done. If it is legitimate and taxed money that you've used in the transaction, you have the right to use it.

Note - I myself am a chartered accountant (not in practice). However, I am not close to the direct taxes department and what is mentioned above is what I have inferred from others experiences.

[Gansan]

Originally Posted by NotanF1driver

But if your income is just 6 lakhs in the IT return and end up spending 15L on a car, it might be picked.

In that case the purchase will be flagged even if it is bought on loan.

So long as we can show the source of funds, we need not worry about the notice issue and go for cash purchase.

[ValarMorghulis]

Originally Posted by anto1212

I went to Skoda Chennai Showroom.

Dealer said If I do the full payment, I might get IT notice regarding the source of funds, etc. He suggested going for a Loan for a smooth process.

Is this true?

Nope. Doesn't work that way. If your source of funds is legal and the money is in your bank account, don't worry at all. I gave a cheque for of 13,90,000 for my Venue in 2019.

[NotanF1driver]

Originally Posted by Gansan

In that case the purchase will be flagged even if it is bought on loan.

So long as we can show the source of funds, we need not worry about the notice issue and go for cash purchase.

Yes, source of fund is the question. However, there is very less possibility of IT department issuing a notice if the car is under hypothecation. As I mentioned, there are no legal restrictions in spending your legitimate money on buying stuff. IT department's notice is just an inquiry to which you can respond and close, or else ask a CA to respond.

[Gansan]

There was a time during the mid-late 90's, when one had to give their PAN number while booking any Maruti car, even the M 800! No PAN, no car!

[RoadTrippin]

I am in an interesting situation where i don't really need to take the loan but given the relatively low interest rates, i am much better off putting my money in other instruments (where i expect a 10-15% return conservatively) and taking a loan at around 7%.

[BHPjunkie]

Unless in business / own profession it absolutely does not make sense taking a loan for a vehicle, from a financial point of view. Of course there are aspirations of owning a vehicle which are taken from the heart rather than head.

I was in a similar situation in 2013 when I started by career. The value of the first vehicle I bought was equal to my annual CTC. My parents helped me with the bare minimum down payment and I took a 5 year loan. Come 2018, I sold the car and the value received was used as down payment for the new vehicle. This time around the value of the car was 50% my annual CTC.

2013 I feel I lacked financial sense. 2018 got a bit smarter. Going forward I have decided never to take a loan for a vehicle (unless I get into business). I have decided that my next purchase will be outright. Also I plan to keep the value of the new purchase at 10-15% of my equity portfolio value, which I started since 2015.

[bwajlearn]

As a salaried person, my pick will be to buy without loan.

My journey, learnings, experiments towards this are

1. Bought car with OTR 4L on loan by 2010 (Had full amount on hand though took a loan on advice from relative).

2. After some DIY on financial planning, started SIP in mutual fund for car by 2014.

3. Target was to buy some car at 6-8L range around 2019.

4. Around 2018 decided to take some risk (with buy date extended to 2020) by moving the entire money to a riskier equity mutual fund. Thinking was that if i get good gains, will go for a next segment or top end of the same segment otherwise will get whatever i had money left at end.

5. Covid happened and fund crashed. I didn't panic though and put some amount into it occasionally. Market came back up and got some 10% gain i believe when sense prevailed. I took entire amount then and moved to a liquid fund.

6. Through out this my target moved from 6-8L car to premium hatchback for 11L to now sedan segment at 15L.

7. Still keeping my car running its 11th year as my usage reduced due to covid and WFH.

8. I put in any bonus or extra money i get to this fund and have increased to 15L now.

Now i have stopped adding money and just waiting for right time to buy. I will either go with an automatic sedan with good features or get a premium hatchback and invest the extra money for next car. This entirely depends on my usage forecast, parking restrictions etc.

Learnings:
1. Start saving as soon as you get a new car. If you have a 8-10 year timeframe, your monthly outgo will be less and it will keep growing.
2. Any bonus money or returns from old investment can be put here.
3. At around 7-8 years, get the money out and move to FD or liquid fund and start going through teambhp for new car buying.

[MaheshY1]

Voted: Can't buy without loan

The 2014 Beat was with a loan. I know I bought more car than I could afford at the time. But the used Nano automatic and all 3 used motorcycles were cash down. Used vehicle loans are expensive and cumbersome.

Going forward, I will take a loan even if I have the cash. I can do better than 10-13% ROI per annum from FnO trading even with lazy, ultra-low risk strategies. Although I target 40-50% ROI along with my job on a mix of low to medium-risk strategies. For me, the opportunity cost is much higher than the interest on the loan. So, taking a loan makes more financial sense. Although, I don't take loans to add to my capital even if it's available at attractive rates.

In my opinion, a vehicle's total purchase price should ideally stay between 3-6 months of your annual income. And NEVER exceed 6 months of your annual income. With that rule of thumb, you can play around with loan, lease, cash down however you see fit and it won't matter much.

[firstdrive]

Might be the right thread to ask this question, I always wondered what if I took loan from my Dad ( he invests in MF and FD)? Can I pay the cheque from my dad’s account but the car be registered in my name?

Obviously I pay him back the FD interest rate that he will earn over course of time along with the principal.

Say as an example I am planning to buy a car worth 25Lakhs.

1) I pay 10 lakhs from my dad’s account.
2) 5 lakhs from my account.
3) 10 lakhs car loan in my name.

Will there be any IT notice for such use case?

[rakesh_r]

Originally Posted by firstdrive

Might be the right thread to ask this question, I always wondered what if I took loan from my Dad ( he invests in MF and FD)? Can I pay the cheque from my dad’s account but the car be registered in my name?

Obviously I pay him back the FD interest rate that he will earn over course of time along with the principal.

Say as an example I am planning to buy a car worth 25Lakhs.

1) I pay 10 lakhs from my dad’s account.
2) 5 lakhs from my account.
3) 10 lakhs car loan in my name.

Will there be any IT notice for such use case?

If i am not wrong, money transferred within blood relation, in you case (father-son-father) is acceptable and wont attract anything from IT. You can mention the same while filing your returns, same as applicable for your father.

[sgmuser]

Originally Posted by bwajlearn

Now i have stopped adding money

I suggest not to stop. Continue to invest (if you are not doing already) something monthly as SIP. These kinds of downturns are good for the MFs where I end up buy more units for the same amount I put in, as you may know already (power of compounding)

Always, I go for SIPs when it comes to MFs. Even with all these mess going around my returns are around 17% (It was around 25% before Ukraine stuff and throughout the Covid years as well it was growing still.). I still put around 35% of my monthly earning there in MFs.

[vamship]

Originally Posted by SoumenD

Voted for Couldn't buy without a loan. And that was a mistake which I realized later.

Being a salaried person with TDS, IT department issues is out of question for me. Due to the typical itch of owning a new car(older one was 8+ year old and manual) & lack of enough funds went with a 5-year loan in early 2019. But thanks to the new found sanity towards financial discipline(a few threads on this forum helped as well), I realized how much money I end up paying the bank as interest uselessly, which could have been easily avoided had I been a little more patient. So started making part-payments every quarter & closed the loan in 1.5 years flat. Had made sure I took the SBI loan which had no part-payment/pre-closure charges. At the end had to pay some 600INR as closure charges. Its a relief to be debt-free

Henceforth will never buy an automobile on loan be it bike or car.

Car Loan makes sense for people if you are going for car lease(from office) or buying it for business. In that case you get good tax benefit. But for personal use where you dont have those two scenarios, I feel its best to go without loan. Ofcourse if its an urgent need and you don't have enough funds going for loan is unavoidable, but should be the last option.

I was looking at the calculations between car loans and car lease from company, and couldn't find any advantages of going through company car lease.

I may be missing something, but what do you think the advantages are?