purchase a used car

How to Plan Down Payment to Purchase a Used Car?

October 24, 2022 • 3683 views

Today, getting the car of your dreams has become easier, thanks to the growing popularity of used or pre-owned cars. India’s used car market is slated to double in the forthcoming years. As per statistics availed by Mordor Intelligence, the used car market in India will reach a valuation of $70.7 billion by 2027.

These statistics can be backed by the high popularity of used cars, the prevalence of various small and large-scale used car dealerships, and the wide availability of different car models to choose from. Understanding the benefits of buying a pre-owned car can help you save on your finances considerably. In addition to this, a wide range of used cars is available in the market, giving you a plethora of choices.

Buying a used car may not be as exciting as buying a new one. However, apart from the feeling of driving a brand-new car for the first time, there is only a little a new car can offer that a pre-owned car cannot. When you purchase a new or a used car, you are often required to provide a certain portion of the car's value as a 'down payment'. The down payment you need to make usually depends on the price of the car, model, and age. However, there are additional factors that influence the down payment amount. In this blog, let's discuss how to plan a down payment to purchase a used car.

Step 1: Determine how to finance the car

There are several ways available to finance a car. You can either go for an in-house financing service at the dealership, get a Pre-owned Car Loan, or choose a lender of your own. It is advised to read, research, and compare the interest rates are that being offered to you by different lending institutions before you apply for financing.

Step 2: Enquire about the required down payment

You must determine the amount of down payment before applying for a Pre-owned Car Loan. Once you get approved for the loan, you will be able to figure out the down payment amount. A down payment is usually a percentage of the total value of the car being purchased, which also depends on the company, model, and age of the car. It is a good idea to check your credit score before applying for a Pre-owned Car Loan. This way, you will be able to determine the loan amount and your monthly EMIs, which, in turn, will help you calculate how much down payment you need to make.

Step 3: Calculate the funds you have

If you are planning to trade in your vehicle with a pre-owned car, calculate the value of your current car. Calculate how much you have in your savings account or other accounts for a down payment. Also, consider how much you want to use for the down payment.

Step 4: Determine your monthly payments

After you decide the type of car you want to buy and the amount of funds you need to borrow, calculate your monthly EMIs. Increasing the amount of the down payment can reduce your monthly EMI amount considerably.

Apply for Used Car Loan

How can I Reduce the Down Payment Amount?

Usually, the down payment on a new car is 20% of its value. For a pre-owned car, the amount is 10% of the car’s total value. If you wish to reduce the down payment amount, there are a few options that you can consider.

  • Trade your current car

If your current vehicle is in a good shape, you can trade it at the dealership for the credit toward your used car. The amount you get from the trade-in will be used as the down payment for your next car, which means no additional funds will go out of your pocket.

  • Look for cash incentives

Car dealerships and automakers launch exciting offers and cash incentives to attract new customers. Keep checking which dealership or pre-owned car company is offering discounts and deals to make the most of your auto financing.

  • Pick a less expensive car

If you feel that your budget will be stressed because of the down payment, you can shuffle your choices and pick a less expensive car. The lower the retail value of the car, the lesser will be your down payment and interest rate, in case you consider getting a Pre-owned Car Loan. You can downsize to a smaller car, choose an older car, or choose a less equipped version of your preferred car.

Summing Up

As the used car market in India is gaining ground, one can consider buying a pre-owned car basis the advantages they offer. Various automakers are also improving their products and services to benefit from the growing trend of pre-owned cars.

If you wish to buy a used car, keeping the down payment on the lower side will help you navigate through potential financial burdens that might arise in the future. However, you can dodge financial distress by availing of a Pre-Owned Car Loan.

Poonawalla Fincorp’s Used Car Loan is easy to avail of, with a digital application process and quick disbursal. We offer high-value sanctions for the purchase of a wide range of used cars, with minimal documentation and competitive interest rates.

To make an informed decision, carefully select your dealer, and your loan amount, and evaluate your monthly payments. You can also use a Pre-owned Car Loan EMI calculator to determine your monthly EMIs.

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