Car sickness is the feeling you get when the monthly car payment is due. Most of you would agree? And why not, there is good reason for it, as unlike your home loan payments, the equated monthly instalments (EMIs) towards your car go for a fast depreciating asset.
However, some smart moves can help you get a better deal on your car loan and soften your monthly EMIs, besides giving you what you actually want.
Smart Move # 1
Keep your priorities clear: Decide what car you want to buy, do not leave it to the salesman. First shop for the car and then for the finance. Identify your requirements, your budget and whether you really need features like a four-wheel drive. Otherwise, you might end up buying a car that does not have the features you need, or shelling out extra money for no real purpose.
Bangalore-based businessman Stefan Erasmus, 32, had his priorities clear when he decided to buy a car. He needed a spacious car with good air-conditioning for personal use as well as for airport pick-up and dropping services.
His focus helped him zero down on the car he finally bought -- Toyota Innova. He initially chose four cars -- Toyota Innova, Chevrolet Tavera, Nissan X-Trail and Ford Endeavour. After comparing prices and features he settled on Innova.
Nissan X-trail and Ford Endeavour were out of his budget, and the significant extra feature these cars had was the four-wheel drive, which he could do without in the city. He chose Innova over Travera as he felt that as far as looks, design and comfort were concerned, the former had an edge.
Smart Move # 2
Spend time shopping around to bag the best deal: Ask yourself an essential question: Have you spent time researching the new car you are going to buy? Answer that in the affirmative and then spend an equal amount of time shopping for the finance. Take your time, months if need be, and be an aggressive and price-oriented buyer. Do not stretch your budget -- even a few hundred rupees extra EMI every month can pinch over the years.
N R Narayanan, group business head (vehicle loans), ICICI Bank, says, "Customers should decide on the car they want go in for after looking at the overall budget. They should look for a combination of down payment and EMI that they can easily manage."
Avoid dealer's finance. It may be hassle free and offer huge discounts, but the fact is that interest rates charged by them are almost invariably higher. Pay as much of the price as down payment as possible.
Remember, a car is a depreciating asset and will give you no returns. So, the less you pay as interest, the better off you are. Check out the rates of direct selling agents of banks, or even banks themselves. Only when you have shopped around considerably, can you zero down on the best deal.
Erasmus did just that -- shopped around and got a good deal for his Toyota Innova. During his research, he found out that different dealers had different deals to offer and that they varied widely. He bargained extensively and the final deal got him a much lower interest rate than the one that was quoted first.
Also, focus on the total price interest repayment amount than just on the interest rate. Be clear about the other charges -- nameplate, registration and insurance.
Smart Move # 3
Buy good cars, not hot cars: "You aren't what you drive" goes a chapter heading of The Millionaire Next Door by Thomas J. Stanley and William D. Danko. The book reveals that a majority of the millionaires surveyed do not drive the current-model-year automobile. There's your cue: to get low rates of interest and bigger discounts, consider not going for the model with a waitlist, but a car that has been in the market for some time.
When a new model comes in, there is a huge demand for it and dealers are eager to sell off older models. It is easy to find out which car is moving slow. It might not be the car of your dreams, or fetch you the highest resale value, but will be a good car to own nonetheless.
For example, right now, you get Rs 5,000 discount for a Suzuki Swift, but Rs 15,000 on a Maruti Wagon R.
When you have zeroed down on a car, shoot for the slowest selling variant. Most of the time a particular variant, which is usually the top-end one, is not the fastest moving. So the dealer will be eager to push it and you can negotiate more and get a better bargain. You can get a lot of additional stuff at a price a bit higher than a lower variant.
Smart Move # 4
Look at net acquisition cost. While trading off your old car for a new one, if you try to get a good bargain for your old car, the dealer will normally tend to jack up the price of the new car. If you want a big discount on the new car, he will push down the price of your trade-in.
Either way, he will try to keep his margin fat. Your aim would be to slim it down and, thereby, reduce your net cost of acquisition. So, you should look for the highest price for the old car and the lowest price for the new one. If your new car dealer is not giving you the best price, sell somewhere else. Some minor repairs and a thorough cleaning might cost you a little bit of money, but will help you get a much better price for your old car.
Smart Move # 5
Skip the freebies, shoot for cash: If your dealer tries to lure you with free goodies -- stereo, floor mats, or seat covers -- do not go for it. They will, more often than not, be of questionable quality. When the dealer puts a price on them to show you what a good bargain you are getting, tell him to give you a cash discount of the same amount so that your loan burden comes down.
Keep these smart moves in mind so that when you drive out of the showroom, you are a happy man behind the wheels who is not likely to experience 'car sickness' in the years to come.
