As mentioned earlier, the interest rates on auto products offered by various lenders varies widely, and are highly volatile depending on factors like credit score of the borrower, make and the age of the car and quantum of car loan sought by the borrower.
A five-step process to secure the best car loan deal is:
Negotiate with the bank and the car dealer separately. Despite the announcement of tie-ups between auto dealers and institutional lenders, remember that there is always scope for negotiating a better deal for yourself with another bank.
Negotiate the rate of interest last, after you have negotiated the loan amount and tenure.
Next, negotiate the car price separately with the dealer. This can effectively be used for adjusting your down payment. If you are planning to sell your old car to arrange for the down payment, negotiate the price of the old car with another dealer. This way you would be able to negotiate the best deal from all stakeholders. Also when you are negotiating with the auto dealer, ask for upfront cash discounts rather than free accessories in its place. You can also get the vehicle accessories cheaper from a fourth party, outside of the showroom.
Also negotiate your car insurance separately from your car purchase and car loan. Ask for a transfer of your no claim bonus from your old to the new car. Not many people know it, but these benefits are transferable. Auto dealers often bundle insurance products at a premium, so it’s better to search outside for a better deal.
Ask for loan EMI quotations from all these stakeholders separately as well as details of processing fees and pre-payment charges. Following RBI dictates, these days, lenders are easy to persuade on the waiver of pre-penalty charges. In any case, you have the option to pay part, and leave a small portion as outstanding loan amount in order to deflect this penalty.