The festive season is when carmakers announce their biggest discounts and banks compete with attractive loan schemes. It may seem like the perfect time to buy, but the real deal is more than a festive price cut. Your credit score can affect borrowing costs, hidden fees can inflate the on-road price, and loan agreements often carry fine print that can have you paying more than you intended. Here’s what to watch out for before driving your new car home.
GST 2.0 – Cars are now cheaper
The recent GST cut has lowered prices across the small-car and two-wheeler segments. For buyers, the cuts lower entry prices. Small cars now attract 18 per cent GST with no cess, larger cars face a flat 40 per cent, and EVs stay at 5 per cent. This rejig has made entry-level and mid-segment cars sharply cheaper, with noticeable cuts even in premium models, sometimes as much as 10 per cent. Combine that with festive discounts and lower interest rates, and suddenly owning a car looks easier.
Credit score – Your ticket to a better rate
When it comes to car loans, your credit score is crucial. A score of 750 or above usually qualifies you for the lowest interest rates. This can make a big difference to your monthly EMI. For example, on a Rs 8 lakh car loan for 5 years at 10 per cent interest, you can save approximately Rs 23,000 if your rate is reduced by even 1 per cent.
Check your credit report before applying and correct any errors. Don’t be discouraged if your score is on the lower side. Banks may still offer you a good deal if you can show steady income or have a long-standing relationship with them.
Watch out for hidden fees
Interest rates are important, but they’re not the only cost. Loans also come with processing fees, which can easily run into a few thousands depending on your loan size. However, lenders often waive these charges off, bundling them as part of their festive offers. So, instead of taking the ‘flat fee’ tag at face value, request for a written breakup of fees for clarity.
Negotiate with your bank
If you already have an existing lender, try negotiating for a better rate and lower fee. Any saving on either can lower your borrowing cost. Don’t settle for a deal without comparing at least two to three lenders.
Read the fine print
A low EMI can be tempting, but a good deal involves a lot more than that. Your overall cost of borrowing is influenced by various elements like interest, tenure, and additional charges. Ask about less-obvious charges like prepayment penalties, mandatory insurance, or RTO fees. For used cars, lenders may charge higher rates or have stricter eligibility criteria, depending on the vehicle’s age. Again, take your time to compare options from multiple dealers to avoid surprises later.
Festive season deals and lower GST rates have made car buying more attractive this season. But don’t rush into the first offer that catches your eye. Check your credit score, ask about all fees, and read the fine print before committing. With the right loan, you can enjoy your new car without the stress of unexpected costs.
(The author is the Senior Manager, Communications at BankBazaar.com. This article has been published as part of a special arrangement with BankBazaar)
