Buying Car on Full Cash Payment. Is It Correct?

[chevrolet]

A endeavour costs around 30 lacs, is it wise to pay the cash fully or is there any better options. The buyer is a salaried person and the 30 lac is his savings money. I read in another forum that taking a loan from fd is a good option. Can someone give a good suggestion.

 

[Fiatian]

Re: Full cash payment ? is it correct?

If its under 10L then going to full cash is good, but 30L is huge if he takes loan it would be helpful for him to file IT returns.

 

[generalmax]

Re: Full cash payment ? is it correct?

30L is a huge money.A car is a depreciating asset. Would suggest to go for a loan of at least 15 lacs and invest the balance 15 lacs in a much more appreciating assets or keep it as cash itself.Loan on FD also sounds good. The best idea is not to put all eggs in same basket.

 

[Nairrk]

Re: Full cash payment ? is it correct?

Yes, better take some loan instead of spending full hard cash. Also Deposit Loan is good idea as then you may need to pay 1% (or 0.5% depends on Bank) extra on the FD interest has to be paid which may work out better than taking a car loan.!!

 

[BoltFromTheBlue]

I recently purchase Vento for 7.1 lacs with full cash payment. As others suggested here, 30L is a huge amount. Eventhough it is a real savings (he must have travelled and stayed lot of years onsite ), else saving 30L in cash is not possible for a salaried class.

I too suggest, got for upto 10L of downpayment and rest for loan. Easy to handle IT dept.

 

[incarnation]

Why invest 30L at once on a car, instead loan would be a better option also if its completely white money then there would not be issues but otherwise he would have a hard time explaining the same to the I.T. Dept. so even i go with all the suggestions given by co-members of the forum.

And also as generalmax suggested it isnt wise to invest everything on a depreciating asset.

 

[TSIVipul]

If one can prove that it's the white money and the buyer has paid the income tax on the money then it's nothing wrong. We always buy cars in cash and it's nothing wrong. Either prove that your taxable income is enough for such a purchase or prove the savings.

 

[allhyundaicars]

I just read the thread title and the first thing that came in my mind was loan against fd. So got to know these things.
* banks will give you upto 90% amount of the total fd.
* interest rate will vary from 1% to 2%
* you can payback the amount anytime without any pre payment charges.
* car will still be in your name and i think no mention of bank loan on the rc card.

Now what is confusing me - how will i pay back the principal amount to the bank ? I read it can be lumpsum or through emi's but will it be debited from the fd amount ? If yes then why would the bank pay a constant rate of the original fd amount ? I hope my question is clear.

 

[harishankar]

From my understanding, the FD is not broken. Loan is just that - a loan with the FD used as a security towards the loan. You need to repay the balance of interest (lending rate - FD rate) on the loan along with the principal. Generally you can repay chunk of the principal in bulk without any restriction and you can foreclose with no penalty.
Note that in a car loan, you pay the entire interest on the amount borrowed across the full term. So you effective rate of interest would be slightly higher than the interest rate mentioned. i.e. though you are repaying a part of principal + interest every month and even in the last part of the loan, the interest is still computed on entire amount since it is spread across the term.
That is why it makes sense to save on interest by borrowing from FD account, since you can repay the principal in bulk at any time and close the loan at your convenience.
Further in a car loan you have a hypothecation on the vehicle, which is in favour of the financier, which must be removed after repaying the loan in full (you need to get the NOC from financier and take it to the RTO for hypothecation cancellation endorsement in your RC). So in effect, the car belongs to the financier while the hypothecation exists - you are simply the "hire-purchaser".

 

[incarnation]

Rightly said Harishankar. FD would be used as a collatral. and no matter what HP would be existing on the car.

 

[Nairrk]

I just read the thread title and the first thing that came in my mind was loan against fd. So got to know these things.
* banks will give you upto 90% amount of the total fd.
* interest rate will vary from 1% to 2%
* you can payback the amount anytime without any pre payment charges.
* car will still be in your name and i think no mention of bank loan on the rc card.

Now what is confusing me - how will i pay back the principal amount to the bank ? I read it can be lumpsum or through emi's but will it be debited from the fd amount ? If yes then why would the bank pay a constant rate of the original fd amount ? I hope my question is clear.

Normally when a Loan is taken against FD (which they normally pay 90% of the FD amount) you can pay the full amount at one go and the FD become active again fully. In my opinion even if you do part payment the bank will adjust your loan amount and the interest payable only for the remaining loan amount. Incase you are not doing any repayment, bank will not ask anything instead at the end of the FD expiry date, they will adjust the loan amount and pay the balance to you.!

 

[allhyundaicars]

Thanks guys for replying. So i think loan against fd is a safe bet. I also read bank provides overdraft facility against this if you have liquidity problem. He can pay the principal amount through his current income and the fd stays intact.

@ chevrolet - any updates ?

 

[chevrolet]

Can some one give a rough calculation for 5 years
1.how much one will get interest on 30 lac fd
2.The loan intrest rate on the fd.

 

[incarnation]

the intrest rate for FD is around 8 percent i belive it was 9% earlier and 9.25 for senior citizen which was reduced recently to 8 or 8.5% not sure.

 

[Nairrk]

The interest rate starts from 7.75% onwards (depends on banks) and 0.5% more for Senior citizens. Co-operative Banks pay bit more, say 9.25%. Normally they charge 1% more on the interest paid for FD as loan interest.