"0 %" Car Loans Availability and its Hidden Cost


Thread Starter #1
Joined
May 3, 2012
Messages
14
Likes
0
Location
New Delhi
Hi Everyone.

This is my first thread on Automotive India.I am looking for a new car, a hatch to be specific.I just wanted you advice on zero percent car loans that are available with some car dealers.

Are they actually zero percent or are there any hidden cost which in long run would not be that beneficial.Some time back I did saw very lucrative offer from VW for POLO but some reason could not go for it.

Also, are there any banks that offer zero percent car loans? I am aware of the general costs of such schemes like processeing fee and forgoing of discounts but I am fine with it since I cannot take or give interest due to my religious beliefs hence looking for zero percent loans.

Advice guys.?
 
Thread Starter #2
Joined
May 3, 2012
Messages
14
Likes
0
Location
New Delhi
Guys..please share you thoughts and information here.I am looking to buy the car soon so some information here would be a good help
 
Joined
Feb 27, 2013
Messages
3,779
Likes
1,335
Location
Bangalore
HI hatch,

Welcome to TAI.

Usually banks do not offer 0% offer for car loans. Maximum they can offer reduced interest rates or waiver of processing charges.

The 0% offer is mainly given by captive financial units of auto manufacturing cos itself (e.g. Skoda/VW finance, Tata Motor finance). They can afford to give you if they do not offer any cash discount/give partial cash discount of the ex-showroom value of the car. The interest you save by 0% is actually the discount.

If you have any quotes at hand from dealers, please let us know so others can advise on the deal.

Cheers,
Anshuman
 
Thread Starter #4
Joined
May 3, 2012
Messages
14
Likes
0
Location
New Delhi
HI hatch,

Welcome to TAI.

Usually banks do not offer 0% offer for car loans. Maximum they can offer reduced interest rates or waiver of processing charges.

The 0% offer is mainly given by captive financial units of auto manufacturing cos itself (e.g. Skoda/VW finance, Tata Motor finance). They can afford to give you if they do not offer any cash discount/give partial cash discount of the ex-showroom value of the car. The interest you save by 0% is actually the discount.

If you have any quotes at hand from dealers, please let us know so others can advise on the deal.

Cheers,
Anshuman
Thanks for the information Anshuman.I do have a quotation of Polo when VW was offering 0% finance couple of months back.However at that time I could not make up my mind to go for it and hence the offer lapsed.Quotation is below

EX. SHOWROOM 5,56,500/-
INSURANCE 21,198/-
RTO DELHI 26,976/-
LOGISTIC 6,000/-
NO. PLATE CHARGES 213/-
ON ROAD 6,10,887/-
LOAN AMOUNT 3,00,000/-
TENURE 2 YRS
EMI (0% R.O.I) 12,500/-
PROCESSING FEE 4,960/-
DOWN PAYMENT 3,28,347/-

One more thing, I have come across this at various forums as well some also have advised not to pay the advance EMI. Just wanted to what exactly is the harm in paying advance EMI or how does the finance companies game you with advance EMI.

Thanks
 
Joined
Jul 29, 2012
Messages
1,559
Likes
497
Location
Delhi
0% etc are all tactics to lure customers to buy new cars.
the amount is offset by not offering any discounts or free bee's on the purchase and passing that off as interest free.

what i would suggest you is to bargain hard for discounts with other dealers and parallely check with other banks like SBI about the interest rates ( they being the cheapest) and then do a comparative analysis and go with the one which suits you.
 
Thread Starter #6
Joined
May 3, 2012
Messages
14
Likes
0
Location
New Delhi
Any one could you please let me know whats the trick with advance EMI. I have got to know from various sources so as not pay advance EMI.Any idea how can a person be gamed with it?
 
Joined
Feb 27, 2013
Messages
3,779
Likes
1,335
Location
Bangalore
Usually Interest is calculated at the end of the period and not beginning. E.g. on a 5 lac loan at 10% interest , 50000/- is interest payable for a year, which you should pay at end of 1st, 2nd... 12th month.

Hence you should pay EMI after completion of each month and not in advance.

This is similar to rent, what you pay end of the month.

Hope this explains.
 
Joined
Aug 2, 2011
Messages
1,247
Likes
458
Location
Bengaluru
Thanks for the information Anshuman.I do have a quotation of Polo when VW was offering 0% finance couple of months back.However at that time I could not make up my mind to go for it and hence the offer lapsed.Quotation is below

EX. SHOWROOM 5,56,500/-
INSURANCE 21,198/-
RTO DELHI 26,976/-
LOGISTIC 6,000/-
NO. PLATE CHARGES 213/-
ON ROAD 6,10,887/-
LOAN AMOUNT 3,00,000/-
TENURE 2 YRS
EMI (0% R.O.I) 12,500/-
PROCESSING FEE 4,960/-
DOWN PAYMENT 3,28,347/-

One more thing, I have come across this at various forums as well some also have advised not to pay the advance EMI. Just wanted to what exactly is the harm in paying advance EMI or how does the finance companies game you with advance EMI.

Thanks
As Anshuman rightly captured, 0% is offered only by the Captive Finances and not by any bank. Moreover, such 0% offers comes with hefty Processing Fee which is not otherwise. So, compare your net cost with discounts, freebies etc. with the same dealer and also a different dealer(s). Whichever is profitable, go with it.

Moreover, from the above figures, the landed cost works out to 628,347 whereas the On Road Cost is only 6,10,887. Even if you include the Processing Fee of 4,960, it totals to 6,23,387. So, I guess, the remaining 12,500 is the advance EMI!
 
Joined
Nov 13, 2013
Messages
5
Likes
3
Location
Pune
I agree with nitin. There is no such thing as 0% and they are all tactics. If you have a religious belief and couldn't avail for interest check with your family members or friends. They would be your best bank.

With banks or agencies you have to pay interest or you wont get a discounted price. It works both ways; either get a discount and pay interest or don't pay discount and get interest free(not 100% sure about this)!

0% etc are all tactics to lure customers to buy new cars.
the amount is offset by not offering any discounts or free bee's on the purchase and passing that off as interest free.

what i would suggest you is to bargain hard for discounts with other dealers and parallely check with other banks like SBI about the interest rates ( they being the cheapest) and then do a comparative analysis and go with the one which suits you.
 
Joined
Feb 27, 2013
Messages
3,779
Likes
1,335
Location
Bangalore
Skoda is giving 0% interest on Rapid for Nov 2013. Just saw the ad in today's TOI BLR edition. But there will be no discount given further.
 
Joined
Dec 23, 2017
Messages
9
Likes
1
Location
Punjab
Usually Interest is calculated at the end of the period and not beginning. E.g. on a 5 lac loan at 10% interest , 50000/- is interest payable for a year, which you should pay at end of 1st, 2nd... 12th month.

Hence you should pay EMI after completion of each month and not in advance.

This is similar to rent, what you pay end of the month.

Hope this explains.
Isn't rent paid in advance? Anyways I met a guy who took an auto loan from pnb for 5 years. His remaining amount, according to him, including interest was around 200000 at the end of 2 years. Interest was like 25000. He tried to pay 1.75 in one cheque but the bank said that Rs. 25000 was adjusted in the first installment as it had only interest so now he needs to pay the full Rs. 200000. Now the million dollar question here is how to spot if the banks are taking the first installment as interest only or including principal?
 

Top Bottom