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-   -   What is finance discount? (https://www.team-bhp.com/forum/indian-car-loans-insurance/26781-what-finance-discount.html)

Hello fellow riders,

I am planning to take a new car on finance. I quite dont understand the language that the bank rep is speaking w.r.t the finance discount.
When I asked about it, he says he would give me a waiver of the *advance* EMI that I need to pay (???), which is my financial discount!!! Is that how it is? or am I beeing framed?

Can someone explain, what a *financial discount* is... (Consider me as a dummy please). I am a bit confused now to negotiate any further :(

Thanks,

Hi,
there used to be two types of discounts once you buy a car
1) Finance Discount
2) Dealer discount

Finance discount - this is the amount that the dealer gets on selling a car on loan and this is given the Bank which gives the loan to the dealer. Normally this used to be in the range of 3 - 3.5 % of the loan amount (varies from bank to bank). To attract and sell the cars the dealers used to pass this amount to Car buyers as a finance discount

Dealer discount - This is on the descretion of the car manufacturer and the dealer. To sell a particular model, they give sometimes some discounts. It can be either cash OR in kind(freebies - Seat covers, MP3 Units, Teflon, floor mats etc etc)

Once you take a loan, with the margin money (Downpayment), you also have to given them 1 EMI as advance. So if the loan is for 36 months, you pay the margin money and 1 EMI and you give post dated cheques/ ECS for rest 35 Months.

In your case the dealer might be adjusting the finance discount against your first EMI and in this case you only have to pay 35 EMI in case of 36 in total (if the loan is for 3 years).

Hope this helps.

Thanks a lot Vipul! That is, indeed, a lot of information for me. I guess, now I have some words to talk with the dealer!

And, you are right, this finance discount was mentioned by the dealer to me apart from the discount he offered. But again, he confused me as well by saying 'you dont have to pay advance EMI, but pay that at the end' which throws ambiguity whether it is 35 EMIs or 36 (considering 3 yrs again).

But, I will figure that out with him.

Thanks again,

It should be 35 EMIs if he is offering discount of one EMI.

In case of SBI, they do not take any advanced EMI, so do check which bank you are dealing with.

aah. that is 'advance EMI'. This person says I *have to* pay the advance EMI to the dealer, and then 35 EMIs to be paid to bank :(
which means, I am not really getting any discount there... he offered some marginal dealer discount of 10K...