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Negotiate a great deal for your dream car

For many Indians, buying a Car is a dream that comes second only to dream of owning a house

Harsh Roongta

01 Feb 2010

For many Indians, buying a Car is a dream that comes second only to dream of owning a house.

The decision to buy a car, very often, prodded by the promise of financing that

Car dealers advertise. Do not compromise, you can now own a Big car for as little as Rs. 10,000 a month, says an advertisement, egging on all with monthly spare money of Rs. 10000 to own the Big Car.

Here are few tips for you to follow to strike a successful deal for the car purchase.

First decide on the make and model of the car.

If you follow the process given below, you will be able to negotiate better.

  • Finalise your decision on the car you want to buy. The interest rates vary from car to car so what is on one car may not be available on other car or even on another model of the same car.

  • Fix the amount of vehicle loan you need. Suppose the car costs Rs. 8 lacs on the road and if you are ready to make a down payment of Rs. 2 lakhs, then freeze your loan amount at Rs. 6 lakhs. Also freeze the loan tenure ( 3 years, 5 years or even more). Interest rates that you get also depend on the loan amount and the loan tenure.

  • Negotiate to get all discounts on the car in cash rather than as a low interest rate.

  • Ask around for preliminary quotes for the given loan amount and tenure for the given car. Freeze on the lowest EMI offered. You should also look at the lenders other than suggested by the dealer to widen your choice. Sites like www.apnapaisa.com will help you do this effectively.

  • Now negotiate on the processing fees (0 1%) most of the times it can be waived. Also there could be charges to getting the hypothecation registered on the RC Book and the Insurance policy. This is the hidden cost which you should be aware of.

  • Now negotiate for cash discounts that can be adjusted against your down payment. Once that is achieved, you can make a try for small freebies.

  • Remember to claim your no-claim bonus on the insurance policy for the new car if you have a claim free insurance for the existing car.

So how do finance companies fare as compared to banks? It does not really matter as long as you follow the above steps.

If you have zeroed in for a luxury car which is expensive then you will find that interest rate is cheaper. Lower rate for bigger cars - Why so? Typically manufacturer of luxury cars do not want to devalue their brand name by giving discounts to customers. So they provide these discounts to the chosen lenders/ dealers who then factor in these discounts while working out the interest rates for you. Sometimes these discounts may not be available in cash instead of a cheap financing rate. Sometimes the discount is provided to the Insurance Company to enable issue of a much cheaper insurance policy but this is lot less common as the No Claim Bonus is difficult to workout in such a scenario.

Car loan process involves some paperwork involved but it takes a lot less time than a home loan. Still devil lies in details.

Now that you have finalized the lender, it is time for bank's agent to collect documents supporting proof of income, residence proof, and identity. You may be required to produce copies of IT returns, salary slips, bank statements, passport, driving license, and other relevant documents. These requirements vary from lender to lender.

After submission of documents, it is time for field investigator to visit your home to double check the facts provided in the documents, such as your place of residence, tenure at work place, and so on. It is essential that you are present during this visit to clarify any query that the investigator might have. Otherwise, the investigator might not get all the facts clearly and could report that the facts you provided do not actually add up - thus forcing the lender to reject your loan application.

As proof of identity, you can furnish your passport, driver's license, voter ID, or PAN card. Any one of the above documents with your photograph is proof that you indeed are the person you profess to be. These documents are valid if you reside at the same place as entered in the above-mentioned documents. If you stay as a tenant, different from the one mentioned on your ration card, passport, or voter ID, you can produce utility bills (electricity or telephone) of the place as proof of residence.

For income proof, salaried people need to submit their latest salary slip, Form 16 for the last financial year, and their bank statement for the last 6 months. Self-employed people need to provide their IT returns for the last two years as proof of income. A credit check from CIBIL will also be undertaken.

Once the lender is satisfied with your documents, the loan is approved. The lender then disburses the amount through cheques or demand drafts (DD).

The process is complete, but there are a few things that you need to keep in mind before you drive away in it. Ideally, you should have two checks on the vehicle - the pre-registration check and then the pre-delivery check. Both these checklists consist of the same check points. The idea is to ensure that the car you choose is the car you drive out of the dealership.

Read the papers properly. Make sure all the blanks in the contract are filled in. Your paperwork should include: Sales certificate, All payment receipts, Registration Certificate (RC) or temporary registration certificate, Check if insurance is adequate, valid, and active, Check for original pollution under control (PUC) certificate valid for one year. Besides check spelling of your name.

Also check that Owner's manual, Warranty card for car, free service coupons, warranty card for battery, tyres and all other accessories, extended warranty details (if opted for). Check roadside assistance contact details, dealership and service personnel business cards.

If any payment formalities still remain to be completed, carry along the relevant post-dated checks (PDCs) or cash or credit card.

If you have a preference for a particular day / time (for auspicious reasons), inform the dealer well in advance.