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Are you considering buying a car right now? Keep these things in mind

Although the country is in unlock mode, some states and cities are due to go into lockdown again. The lifeline for many in urban cities has been public transport like metros and local trains, and that may not be back soon. So is it time to consider buying a car? Here’s what you need to know.

buying car

We have talked about the best new cars in the market to buy post lockdown, but let’s also get into the nitty-gritty of the money involved. Here are 5 things you should factor in when buying a car today:

1. Current scenario

An ‘HT Mint’ report mentioned how retail demand for smaller cars is due to be back, and rural demand has increased owing to the movement of goods. According to the Indian Express, first-time buyers are fuelling recovery in sales that were nil for many in April during the lockdown. Social distancing and the risk of contracting the virus has driven individuals dependent on public transport to buy their own vehicles; getting and Uber or Ola each time comes with its own challenges.

2. Special deals

Since demand has been higher than production of cars in June (according the mentioned ‘HT Mint’ report), dealers are paying lesser to keep the vehicles in showrooms. This could translate to lower prices for consumers. While recovery is picking up, sales are still slower than last year and auto manufacturers and dealers are adding deals and discounts, which benefits a first-time buyer. If you have zeroed in on the brand, you could check the websites of the car makers on the deals they are currently offering. When at the showroom, you could ask for an extension on free servicing and more accessories too.

3. Ex-showroom and On Road Price

If you are an auto enthusiast, you might already know this. Nonetheless, it does not hurt to know that the ex-showroom price (when the car is viewed in the showroom) is always lower than the on road price.The on road price includes state registration charges, a lifetime road tax payment, mandatory insurance, and logistics charges (dealer handling). If you augment via accessories, then those charges will also be added to the net final price.

Take all these into consideration when you are putting together your final budget.

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4. Car Insurance

We said that car insurance is part of the on-road price of the car that you have your eye on. However, you have to get it renewed every year. There are two types of insurance available in the market–comprehensive and third party. A third-party insurance only covers damages via a third party. A comprehensive car insurance will cover for your own damages as well.

The premium at renewal will depend on a couple of things: How old the car is and if you claimed insurance in the past year. A no-claim bonus acts as a deductible on your renewal premium, making it cheaper. Another perk you can look out for is free roadside assistance that many insurers are now providing.

5. Car Loan

This one requires a lot of details, so let’s break it down.

If you are thinking of using a loan to buy that dream car, make sure you have a booking fee ready, although it may be nominal. You book your car and then apply for an auto loan. Oftentimes, dealers have bank partners who will help you out. If not, you could apply online on any loan aggregator site.

You will have to select a tenure that is suitable to you since that changes the EMI amount. Next, your credit score is checked to determine if you need to make a down payment. Having hard cash (or cheque) ready for it is advisable. You should also check if your loan is being provided for the ex-showroom price or the on-road price. Your car is delivered to you once the bank pays the dealer. It is important to pay your EMIs on time throughout your loan tenure.

What’s more some major banks like HDFC and SBI have cut their MCLR rates, which means interest rates on loans will also be lower.

While these 5 are the major money-related decisions you have to make, there are a couple more that will help you in buying a car. Many car owners prefer to buy a diesel-powered engine, although it initially means a bigger dent to your bank account. Diesel has historically been a cheaper fuel and allows cars to record more mileage per litre. This averages out that extra lakh or so you spend upfront.

Anam Naqvi

Anam is an astute writer who aims to demystify personal finance and wealth management for the common man. She has written on geopolitics, economics and politics for the Economist Intelligence Unit before moving to personal finance content strategy. Her penchant for storytelling and conversation has resulted in a podcast about human stories called “Sapien Story”.