Amit Jain, a mid-management executive from Nagpur wanted to purchasea four-wheeler. With family responsibilities and monthly expenses, he had a modest budget to buy his first car. Fortunately, the availability of a large number of pre-owned carsmade it easier for him to drive in his own four-wheeler.
Amit is amongst the over 4 million buyers who are contributing to the growth of the used car industry. This industry is witnessing unprecedented growth due to several factors like growth in e-commerce, customer aspirations, and offers backed by manufacturers.
The new car to used car ratio has increased to 1:2.2. This means for every ten new cars sold, 22 old cars are being purchased. Moreover, the easy availability of used car loans is driving the demand for second-hand cars.
Pre-owned car buyers are worried about being cheated. Some people may end up buying a vehicle they did not want. Others may find themselves stuck with a car that is damaged and requires extensive repairs. To avoid such situations, here is a complete guide to buying used cars in India.
Benefits of buying used cars
Pre-owned cars are cheaper than new vehicles. You may overcome the risk of buying a car that is not in good condition by working with a reputed certified dealer.
- Lower depreciation
New vehicles depreciate quicker than old cars. The first-year depreciation of a new car is as much as 40%. Such huge depreciation in the value is curbed when you purchase a used car.
When you opt for a certified dealer, you may receive a warranty. However, the warranty may be limited and may cover a certain number of kilometers within a pre-determined period.
- Lower insurance premium
Along with used car loan interest rate, the insurance premium is also affected by the vehicle’s age. In general, the premium is lower for pre-owned cars when compared to new vehicles.
Certified vs. non-certified cars
There is always a debate on whether to pay more for a certified used car or not. The risk that a private seller is not completely honest always exists. A certified dealer provides you with the peace of mind. Vehicles are thoroughly inspected before being put up for sale by certified dealers. This ensures you do not face any problems in the future. In addition to the assurance of buying a well-conditioned vehicle, certified dealers may have tie-ups with reputed lenders that offer second-hand car loan.
Steps to complete the purchase
- Select the model
You must consider your driving habits and needs before selecting the model. You must conduct extensive research on different brands, models, pricing, and technical specifications to shortlist your car.
- Explore buying options
Pre-owned cars may be purchased from direct sellers, local dealers, car companies, online advertisements, and web portals. Each of these options has pros and cons and exploring all options ensures you receive the best deal.
- Check payment options
Non-banking financial companies (NBFCs) and banks offer loans for used cars. You must compare various features and terms and conditions offered by different institutions. Considering factors, such as loan amount, down payment, tenure, processing charges, and interest rates will help make an informed decision.
- Test drive the car
A test drive gives you the opportunity to get a feel of the car. You must check for any unexpected noises, vibrating steering wheel, and other flaws. Test drive ensures all parts are in good working condition. Moreover, lenders will easily sanction a second-hand car loan if the car works smoothly.
- Inspect the car
Check for the registration year, mileage on the odometer, the smooth start of the engine, leaks, properly aligned wheels, and the air conditioning. Also, ensure shockers, bushings, and suspension springs are working properly. All electrical components, such as lights, wipers, and battery must be in good condition. Seeking help from an experienced mechanic is advisable.
- Check vehicle documents
It is important to check all vehicle documents. These include the registration booklet, pollution under control (PUC) certificate, insurance, and road tax receipt. If the previous owner has a loan, the lender must provide a No Objection Certificate (NOC). This NOC is required if you also want to avail of used car finance.
Remember to transfer all ownership documents to your name. The registration certificate (RC) book, sale transfer forms, NOC, insurance papers, chassis number, and PAN card copies must be submitted to the Regional Transport Office (RTO) to complete the transfer. You may eliminate all these hassles by working with certified dealers who will complete the entire procedure and assist you in availing of aloan for a second-hand car.