• How to Arrange a Loan for a Second-Hand Car?

    Most lenders in India - banks and Non-Banking Financial Companies (NBFCs) provide used car loans for the purchase of used/second-hand/pre-owned cars. The age and model of the second-hand car that you choose plays a major role in obtaining auto financing for the purchase of the said car. Before approving a used car loan application, lenders consider the age of the car and whether the model has been discontinued. The sum of the age of the car and the loan tenure of a used car loan must not exceed more than 8-10 years. The older the car, the harder it is to obtain sufficient funding to purchase the car. Opt for a newer car model and one that is not more than 2-3 years old.

    Benefits of Purchasing a Used/Second-Hand Car

    Most consumers hesitate to opt for a second-hand car when they dream of owning a brand new car. However, there are various benefits to purchasing a used car such as:

    • Nowadays, there are several organised used-car dealers who ensure second-hand cars are damage-free, well-maintained, and certified.
    • It is better for new drivers to practise driving in a used car rather than putting a dent in a brand new car. After perfecting the art of driving, you can opt for a new car and drive it with confidence.
    • The depreciation rate of a car is highest in the first 2 years of buying it. Fortunately, the owner of a second-hand car doesn't have to worry about the depreciation costs of the car.
    • No sales tax is levied on a used car.
    • There is no waiting period for the delivery of a used car.
    • The sum of money that you save up to buy a brand new car with moderate features can be used to buy a high-end second-hand car with advanced features.
    • The down payment on a used car is lower than a new car.
    • The price of a used car is lower than a new car.
    • By opting for a used car loan, you don’t have to break your long-term savings scheme like an FD in order to purchase a car of your choice.

    If the second-hand car is to be bought from a private seller, it is advisable to do some research such as whether the car is stolen or is there an unpaid debt on the car, and the lack of proper maintenance of the car.

    Second-Hand Car Loans in India

    Once you have narrowed down the make and model of car you wish to purchase, look for used car loan offers across the top lenders in the country. Visit a reliable third-party website to compare various used car loan offers and choose one with the lowest interest rate, zero processing fee, a suitable loan tenure, and flexible repayment options. After choosing a reputable lender who promises minimal paperwork and instant loan disbursal, check the car loan eligibility criteria set by the bank or NBFC.

    Second-Hand Car Loan Eligibility

    Any salaried or self-employed individual aged between 21 to 65 years with a steady income, a good credit score, and a stable occupation can apply for a used car loan. The loan amount, interest rate and loan tenure of a used car loan differ from lender to lender. As the resale value of a second-hand car is low, lenders offer used car loans at a higher interest rate compared to new car loans. You can always negotiate with the lender for a better interest rate. Furthermore, the insurance cost of a used car is higher than a new car as a result of a high maintenance cost and the scarcity of car spare parts.

    How to Apply for a Second-Hand Car Loan?

    Banks offer up to 80-85% of the total value of the used car for a loan tenure of 1 to 5 years provided the total age of the car and the loan tenure doesn't exceed more than 8-10 years. When you approach a bank for a used car loan, the bank will appoint an expert for the valuation of your car. The bank will offer you 80-85% of the total value of the car as assessed by the valuation expert. You will have to make the down payment and pay the differentiation amount out of your own pocket.

    Visit the bank website, download the car loan application form, fill it up and submit it along with the necessary documents like identity proof (Aadhaar Card and Passport), age proof (PAN Card and Driving License), income proof (Form 16, last 6 months’ bank statement and payslips), and address proof (utility bills and ration card). The bank will verify the details furnished by you and process the car loan application. Upon car loan approval, the loan amount will be disbursed to your bank account in a short period of time. You can also visit the nearest bank branch to apply for a used car loan.

    Second-Hand/Used Car Loan EMI

    Like a new car loan, a second-hand car loan is also repaid through Equated Monthly Installments over a specified loan tenure. To find out how much your used car loan will cost you monthly, you can use the free online car loan EMI calculator, available on the bank website or a third-party comparison portal. The tool is easy and simple to use.

    All you have to do is enter the car loan amount, loan tenure, interest rate, and processing fee into the tool. Click on ‘calculate’ and get instant and accurate results in the form of an amortisation table, a bar graph, and a pie chart. The amortisation table represents the periodic loan repayment schedule of your car loan. It consists of interest payments, EMIs and the outstanding due after each EMI payment.

    Top Banks offering Second-Hand Car Loans

    Here is a list of the top banks and NBFCs providing second-hand car loans in India:

    Bank Loan amount Loan tenure Rate of Interest
    State Bank of India Up to 2.5 times your net annual income 1 to 5 years, provided the age of the car is not more than 5 years 12.60% p.a.
    HDFC Bank Up to 100% value of the used car 1 to 7 years, provided the total age of the car and the loan tenure doesn’t exceed more than 8-10 years 11.50-17.50% p.a.
    ICICI Bank Up to 80% of the price of the car 24 to 35 months 10-17.65% p.a.
    TVS Credit Services Up to 85% of the price of the car 1 to 5 years 13.1-15% p.a.
    Sundaram Finance Up to 85% of the purchase price of the car 1 to 3 years, provided the age of the car by loan maturity does not exceed more than 8-10 years 12-14% p.a.

    Before applying for a second-hand car loan, check your car loan eligibility so as to avoid a loan rejection that can have a negative effect on your credit score.


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