ARTICLE: How to get the lowest EMI & the best Finance Deal

ARTICLE: How to get the lowest EMI & the best Finance Deal
With a never-ending stream of automotive launches and a plethora of financing options to choose from, it is now easier than ever before to buy a new car. Be warned, however: your urge to buy also makes it easy for financial companies to fleece you. Competition is fierce in the automotive market; be sure to use it to your advantage.

Team-BHP shows you how to get the best possible financing deal for your shiny new wheels:

1. Shop around: While this advice seems obvious, it is often ignored: getting rates from several brokers and car dealerships is the key to a good deal. If you intend to buy a Honda in Mumbai, bargain with Ichibaan / Linkway / Arya and any others. When you ask for your quote, tell the vendor that you intend to shop around and be certain that they know you are serious about buying. Casual inquiries take up a lot of time for dealers; an inquiry with good sales potential will make them bend over backwards for you.

2. Negotiate: Many people don't realize this, but if you want a great financing deal you will have to negotiate for it. Negotiate hard. Pit at least three competing quotes against each other and start bargaining with each vendor. You will be surprised at how quickly the offered equalized monthly installment (EMI) payment will drop in the course of an hour of simple bargaining. And its a LOT of fun too!

3. Targets: Start negotiating in the third week of the month. Most Indian agents have monthly targets and generally save the best rates for last minute deals to fill their quota.

4. Other accounts with the same institution: Leverage any existing relationship (credit cards, investments, etc) that you have with your financial institution. Most banks will offer a 1 - 2% discount based on the fact that you are already a known quantity to them.

5. Do not take the interest rate at face value: When your broker says that his great interest rate has been calculated "just for you", you don't have to take his word for it. Use any one of a number of online calculators to compare; chances are, your broker is bluffing.

6. Manufacturer financing plans: Some manufacturers offer financing plans that are less expensive than broker or dealership options. For e.g. the Tata finance option.

7. Nationalised banks: Nationalised banks like the State Bank of India have very competitive auto-loan packages that usually offer the best rates and terms, especially if you have an existing relationship with them. Meet with your branch manager for a quote.

8. Hidden fees: In today's competitive market there is no such thing as a processing fee for a car loan. Ask for an all-inclusive quote and check the fine print for hidden charges. These miscellaneous fees can amount to thousands of rupees. You will also see a difference in stamp duty charges etc. from one proposal to the other.

9. Do NOT opt for ECS: Even though automatic electronic withdrawal from your bank account is supposed to make life easier, the system is not yet a 100% reliable in India. Make your loan payments the old-fashioned way with cheques and read the Team-BHP forum discussion on ECS for more details.

10. Be wary of unauthorised dealerships: Even if you get a great financing offer, check to see who will be delivering your car. Some Direct Sales Agents (DSAs) have connections to unauthorised dealerships. These dealers often engage in shady practices like supplying counterfeit spares and are generally not worth buying from.

11. Pre-payment penalties: Some banks charge rates as high as 5% of the total loan amount if you pay off your loan early. Check to see if your bank included a pre-payment penalty in the contract and ask for a waiver / reduction if you intend to pay the loan early.

12. Maintain a good credit history: Financial institutions in India maintain a central database to keep track of your credit history. It is essential to keep a clean credit record by paying credit card bills and other loan EMIs on time.

13. Loan against fixed deposits: If you or your family has invested in fixed deposits, you are in luck. Taking a loan against fixed deposits leads to very lucrative interest rates, minimal paperwork (if at all) and flexible repayment plans. Banks usually give loans against fixed deposits at a +1 interest rate.

Happy hunting for the lowest EMI!

EDIT : Added a superb "Loan Amortization Schedule" excel sheet to this post; members can download the same. Thanks to BHPian nikunj_cal for sharing it with us. It will help you to calculate the EMI for different loan amounts, juggle between interest rates, calculate total interest, calculate foreclosure charges and so on