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Tata Capital > Blog > Loan for Vehicle > Used car loan vs New Car loan – which one should you opt for?

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Used car loan vs New Car loan – which one should you opt for?

Used car loan vs New Car loan – which one should you opt for?

Buying a car is not so difficult any more. Once considered to be a luxury item, now it has become a necessity for most people. It has eased travelling for people, given them a chance to take their families out and even go for a solo drive, at times to seek solitude.

Know More About Used Car Loan

Well, if you are planning to buy a car, there may be a dilemma about whether you should buy a brand new car or go for a trusted second-hand car. Many feel buying a new car is not a great financial decision, and it is better to go for a second-hand vehicle especially if it is your first car. A new car, on the other hand, is fresh and can deliver superior performance if you spend a bit more. Depending on your final decision, you will need to apply for a loan because financing is affordable today. Let us study the pros and cons of a used car loan versus a new car loan. Read on:

Loan amount:


A loan for a new car means there are very little unknowns from the financier point of view. It is a new car so quality and performance are not an issue. It has zero miles/ kilometres on the odometer. In case a second-hand car, the loan is given by taking into various factors including the condition of the vehicle. The loan-to-value (LTV) ratio is lower in case of a used car. Financial institutions like Tata Capital, believe that you should not worry about money when you wish to buy a car and offer high loan amounts, by, extending up to 95% loan on your car value. So, you can get between Rs 1 lakh to Rs 50 lakhs if you meet the eligibility criteria in used car loans.


Loan tenure:
The loan tenure is another key area for borrowers. Everybody wants to spread out a loan over many years so that the car loan EMI is manageable. While you will get a loan for a longer tenure in a case of a new car loan, financial institutions providing second-hand car loan are also trying to match the offers. For instance, Tata Capital offers used car loans for up to 60 months or 5 years.



Loan interest rates:
New cars carry lower risk, so they often carry lower loan interest rates. In case of a used car loan, the rates typically are higher. This may seem like a disadvantage. However, do remember a higher loan interest rate can also ensure that you repay the loan ahead of maturity. Also, today used car loans interest cost similar to new car loans. For instance, Tata Capital offers used car loans starting at 12.5%. Plus, minimal paperwork and quick online application process also provide a big relief when you take a loan from Tata Capital.

Flexible EMI options:
A customized car loan can really provide a lot of benefit to the buyer. While new car loans are popular, the second-hand car loan variety is not very behind. One can get a variety of flexible EMI options for Used Car loan. For example, Tata Capital offers the choice between Fixed EMI and Structured EMI (customized). Under fixed EMI option, the instalment amount remains the same for the entire used car loan period. But in Structured EMI there is a lot of freedom, especially when you as a borrower expect income to increase at regular intervals.

Buying a car is a significant commitment given the initial, running and maintenance costs. If you don’t want to splurge a lot and want a reasonable performance under a small budget, opting for a second-hand car is a smart choice. If you need more information or want to apply for Used Car Loan, get in touch with Tata Capital for instant assistance on used car loans.

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