Financing your Nexon
Did you know that the average person buys his car thru Finance? The people who buy their cars with full cash down are minuscule. So if you decide to buy a Nexon on Finance, read on.
There are basically two types of financiers. viz Bank (HDFC Bank, ICICI Bank, State Bank) & NBFC - Non-Bank Financial Companies (Reliance Auto Finance, Sundaram Finance, Tata Capital). I personally recommend a bank to an NBFC. Shop around for a good deal and don't just stick to dealer or just one channel. Moreover, Banks are governed by RBI & there are lot of good practices that banks follow over NBFCs. Again, you'll be dealing with lesser paperwork and a faster turnaround time if you go with a bank, rather than NBFCs.
The best place to start would be your primary banker where your salary is deposit or your business account is with. They know you have a steady income and won't hesitate to process your loan. They'll neither ask you for salary statements, bank statements nor any security or guarantee etc.
Get an "In-Principle" approval from the bank even before you start visiting dealers. This will help you set the budget, finalise a brand & variant that suits your pocket and finally negotiate a good deal to suit your budget.
The trend nowadays is not to get new customers but to cross-sell existing products to customers. Example, a credit card customer or a savings bank customer would be offered a loan or an insurance product.
Try with your home branch first, for the best deal that they could offer. If you are in some preferred banking program by HDFC or Axis Bank, start with your relationship manager.
Do note that interest rates can vary depending on the channel. Example, your relationship manager can offer a better interest rate rather than online sales or the bank representative at the dealership.
Some banks would say they can give you a good deal if you take other products from them. Example, ICICI may say, they'll offer you 0.25 percentage lesser interest than others but you need to take Lombard insurance for your car. Don't fall for the trick. Negotiate the best deal for loan only and don't allow the sales person to club products. What's the guarantee the product they provide is the best and the premium expected is competitive.
Avoid sales partners, agencies, affiliates and other middlemen. Remember, you would be paying their commission in the form of higher interest rates. To check if the person is genuine, ask him to send a test mail from his official bank ID. That way, you can ascertain he is an employee and all communications can be made to that ID. If something is sent to a work mail ID, it becomes official and he has to abide by it.
Online is a good option but do note that if you opt for online, you are paying the commission to the online outlet and not the bank, through a higher interest rate.
Avoid taking a loan from the dealer as the bank would disburse to the dealer without your consent. Do note that you are a one-time loan customer but the dealership is a repeat business opportunity provider. Take a guess on whom the bank will support. Bank doesn't have to keep you happy. You are liable to pay the EMI, irrespective of whether they have played smart with you or not. Be smart. Avoid dealerships.
After finalising the financier, Before signing on anything, get their offer written on paper or on mail. Ask for the amount approved, % interest, tenure, processing fee & most-importantly the EMI amount. They are liable to give you an in-principle approval in writing, free of cost. If they are asking for money for an offer itself, steer clear.
Look out for your financier asking about "blank cheque". NEVER issue a blank cheque. No ethical financier will ask for the same. Federal bank asked for blank cheques from the customer. citing security. If you are unable to pay, they can fill up any amount they want, and a bounced cheque could land you in jail. AVOID financiers who ask for blank cheques & go with any other well-known financier.
While handing over the copies of various proofs, sign the documents and mention the purpose. Example sign the Aadhar copy & write below that this is for vehicle registration purpose. That way they cannot use your aadhar to issue a credit card to you.
Don't look only for the lowest interest rate. Do remember to compare other parameters and most importantly customer service. Example I choose HDFC home loan over LIC home loan, even though I pay 0.25% interest more, just because of customer service and the contacts my relationship manager has.
Insurance on loans - This is a new trend or rather new product which financiers use. This apparently protects your EMI and if you are unable to pay due to job loss or any unforeseen instances, they apparently pay your emi. The terms and conditions are too stringent and its usually not beneficial to customer. Clearly opt out. It is not mandatory to take this and banks can't compel you to opt for this. All sales agents get a hefty commission for selling you these products.
Cross Selling: - What's cross-selling? Its a trend that's picking up fast. Read-on to know more.
Say you are going to opt for a car loan from ABC Bank. They'll offer you a car loan & also request you to open a savings bank account for them to "auto debit" the EMI amount. Along with the savings bank kit, you'll be given a "Debit Card". You might be offered a credit card too, sometimes. Now, you would be sweet talked into taking the car insurance with whom you have taken loan example, you'll be asked to take Lombard insurance if you apply with ICICI or Ergo insurance if you have taken HDFC loan. Now at the time of signing that loan paper, you'll be brainwashed, the sales guy will create a sense of insecurity and asked to take a "loan insurance". They will mandate you to take their own FASTAG citing govt regulations. Govt says FASTAG is compulsory but it doesn't say from which vendor you should purchase. Now count from top and when you approached the bank for a loan (single product), They have successfully sold you six additional products, excluding the loan. Be very careful and don't get fooled or talked into buying products that you don't need. Maruti dealers are notorious to sell auto-card and/or Maruti-SBI credit card / Maruti Nexa-HDFC credit card while booking a Maruti product.
Brand Loyalty - Good practice?
Now that you have decided to buy say a Tata, it is normal to think of going with Tata Capital for a loan, and Tata AIG for insurance. Nope. I wouldn't recommend that. Go with them only if they offer a competitive quote and their offers are on par with the market rate. Other players are equally competitive and offer better value for money. Shop around then choose. It will save you a good amount of money.