Planning to buy a car? Choose lowest repayment tenure when taking auto loan

For salaried, it's a depreciating asset with no tax benefit

• Car loans are usually of around seven years, but some lenders offer loans for up to 10 years
• A long-tenured loan means smaller equated monthly instalments (EMIs), which may make the car seem more affordable. But you end up paying more interest
• A car is a depreciating asset. Taking a bigger loan may not be the best thing to do unless you are a business owner who is buying the vehicle for office use
• While a salaried person doesn't get any tax benefit on a car loan, a business owner can deduct the interest paid when filing returns
• In any loan, it's advisable to make as much down payment as possible. A higher contribution from the borrower reduces the need to take a huge loan. This will allow him to opt for either a lower EMI or a lower tenure
• When purchasing a car, many buyers go for the lender that has a partnership with the dealer. Avoid it
• These lenders charge a higher interest rate, which allows them to offer a hefty commission to the dealer. Compare rates online before you finalise the lender
• Sometimes a dealer may offer a discount on the car value if you take a loan from its partner lender
• Sometimes a manufacturer may tie up with a lender and offer discounts to push up the sales. Again, compare your total interest outgo in this case with other lenders
• When evaluating an auto loan, check whether the lender is giving a loan based on the 'ex-showroom' or the 'on-road' price. Typically, lenders offer 95-100 per cent financing on the ex-showroom price