[SN88]

We have a unique way of buying cars interest free. We are 3 siblings all married now. We help each other when buying a car outright. If any 1 of us are falling short, the other 2 front the remaining money and buy the car outright.

Same when the others need to purchase a car. Interest is saved and all 3 of us touchwood are there for each other. All of us HATE emi's!!

[livetodrive]

Could not vote for any option since I sucked money out of my overdraft home loan account and made a full down payment for my car. In the process enjoyed 7% home loan interest for my car and also got tax exemption on my interest certificate. Avoided another set of loan processing and documentation. Kept home loan running and tried to repay the loan as soon as possible so that I can take out money for some other purpose in future.

Not sure if this makes sense. I am not good in complex calculations.

[dwarika]

Originally Posted by livetodrive

Could not vote for any option since I sucked money out of my overdraft home loan account and made a full down payment for my car. In the process enjoyed 7% home loan interest for my car and also got tax exemption on my interest certificate. Avoided another set of loan processing and documentation. Kept home loan running and tried to repay the loan as soon as possible so that I can take out money for some other purpose in future.

Not sure if this makes sense. I am not good in complex calculations.

That was indeed a smart move and definitely makes sense.

I recently bought a Skoda Rapid on my company name and hence opted for car loan as I wanted to build some credit score for the business through a secured loan. Opted for 4 year tenure but intent to go for foreclosure of the loan by 2 years.

[varkey]

Originally Posted by 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%.

I had the same thought, why block a big chunk of your money in upfront payment, when you can take a low interest loan and let that money work for you and earn 4-5% (or even higher) more.

Say I have 15L saved that I can use for a car, at even 10% CAGR, the 15L will become ~24L in 5 years ie 9L profit. Now if I take a 15L car loan at 7.25% interest, I'd up paying less than 3L as interest over 5 years. Even if I continue saving the EMI amount in the case of upfront payment, at the end of 5 years I'd be better off going for a loan.

Now, I understand that there is a risk involved, and my capital can erode as well, so it would depend on your risk appetite. I think as long as the car loan interest rates are low and equity funds tend to give better returns, I think I will go for a loan even if I have the money to pay upfront.

In case you are going for an EV, then it makes it even more lucrative to go for a loan as you get tax benefits for the interest paid for the car loan.

[nettooran]

I have bought 2 cars in the last 10 years, both bought with ready cash. And the way I got this cash was by taking a gold loan (plus saving from RD that I keep aside for this same reason) The interests are more or less the same as car loan , but the advantage is that thera are no EMI's involved and no penalty for part payment.
I usally keep aside a good sum every month towards repayment. I skip some months if there is any other requirement of cash and there are no penalties. And when I receive the annual performance bonus from the employer, I use a big chunk for repayment.

I have closed both the loans ( 7 and 6 lakhs respectively) in 3 years both the times. I dont think I have paid more than 30k in interests, because of huge part payments.

The only downside is the frequent question from wife on when she will get her gold back . I tell her it is safer in the loan locker than in our locker because if the bank gets looted, they still owe us the exact amount (no idea if it is true). So the interest we pay them is actually an insurance premium.

[SoumenD]

Originally Posted by vamship

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?

AFAIK company lease policy gets some tax benefits on EMIs. Whereas a normal car loan doesn't have any such benefits.

[Scorpio80]

Originally Posted by 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%.

I was in a similar situation a year ago when I bought my car. Went for loan instead of liquidating my investments. Turned out to be a good decision, considering the 15%+ returns on my investments since then.

[gurminder_81]

Originally Posted by livetodrive

I sucked money out of my overdraft home loan account and made a full down payment for my car. In the process enjoyed 7% home loan interest for my car and also got tax exemption on my interest certificate. Avoided another set of loan processing and documentation. Kept home loan running and tried to repay the loan as soon as possible so that I can take out money for some other purpose in future.

+1
I have exactly the same plan for my imminent car purchase. I have an overdraft account for home loan running and have kept the extra cash in it. When the time comes later this year, I will pay with full down payment for my car from that account and reap some taxation benefits on the interest paid.

If the home loan would not have been there, I would have preferred to take the car with full down payment. The peace that you get with EMI free life is unmatched.

[Vibhav-Van]

Originally Posted by RoadTrippin

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%.

Valid point, and makes total sense.
Your mention of 10-15% return caught my attention. Considering that I am a slow moving animal on the financial investment highway, FD is the only investment I trust. Where can I invest for such returns, so I can use it to plan an upgrade?

P.S. - Sorry if this suits better in the investment thread. Posting it here since it is in context.

[deathwalkr]

I am planning to buy a brezza for my father and it's around 10L on road. I was planning to take a loan for 7L and pay the rest from savings.

Is that the right way to go?

[yogishkamath]

I follow the following rule for all depreciating assets: If you can't afford it without a loan, you can't afford it at all.

This also helps avoid the "middle class guilt" associated with buying a car that is too expensive.

[prajwalmr62]

Originally Posted by deathwalkr

I am planning to buy a brezza for my father and it's around 10L on road. I was planning to take a loan for 7L and pay the rest from savings.

Is that the right way to go?

Without knowing your current financial status, it is hard to suggest anything. I would say talk to some finance planner for the same, suggestions from online can be dangerous.

Saying this, I would suggest you not to pour all your savings to buy a car. My personal rule is, if you can buy 2 cars of same price, buy 1 car. loan or otherwise.

[Livnletcarsliv]

It depends.

There are 3 types of car buyers
1. Buying with heart.
2. Buying with head.
3. Buying with head and heart.

It is almost always impossible for a person to buy a car with outright full payment, if its a heart based buying. For eg - A middle person like me who always buy a car with heart - I love Bimmer's for obvious reasons that it is an enthusiasts car. So if I have to buy a BMW with outright cash, I will probably have to wait for decades. So right now, all that I would probably check is only whether am I capable enough to pay the monthly EMI, take care of the yearly maintenance and of course, continue with my existing lifestyle with necessary/enough savings. Live and Let Live.

Of course, head buyers will always keep the financial priorities ahead of the car itself. So they may choose the full payment option.

The last type of buyer will more or less fall only in the rich category.

[Cresterk]

Originally Posted by Vibhav-Van

Valid point, and makes total sense.
Your mention of 10-15% return caught my attention. Considering that I am a slow moving animal on the financial investment highway, FD is the only investment I trust. Where can I invest for such returns, so I can use it to plan an upgrade?

P.S. - Sorry if this suits better in the investment thread. Posting it here since it is in context.

You can get those types of returns from equity investments such as through mutual funds or smallcases or even buying individual stocks yourself if you are familiar with the stock market. You have the probability of getting even more if you use fancy portfolio management services but they charge a lot as management fees so its only worth it if your investment portfolio is going to be 2 crores or more.

Do note that none of these are guaranteed returns and you can very well lose some or even all of your initial capital if you don't know what you are doing.

[Maky]

On this topic two questions for anyone who might know the answer

- Firstly, regarding 'CIBIL score' what is the score/interest rate offered for a car loan to an elderly person(senior citizen) who has thusfar never taken a loan in their life but is now purchasing their first car on loan?
- Second, do non-repayment on loans against self LIC policy(where on maturity amount is credited principle minus interest fee) count towards a negative CIBIL score?

Thank you.