The purchasing procedure for a car can be a time consuming and complicated process. If you intend to buy a car, you might be wondering how long till you get your own car with all the hassles of advance booking, obtaining a loan, registration process, arranging paperwork, and what not. Sounds like a tedious process!
But wait, there is hope! There are some financing sources that you can use to make your vehicle possession a reality. First time car loans can be the hard to get, since you don’t have a reputation or credit history to go on and you truly might not know where to look for the best sources of financing. While we may not be able to help you with other areas of purchasing a car, we may be able to guide you about finding and arranging for the best sources of financing for it so you can compare with ease, while knowing what to look for!
The most basic thing that you should always be aware of, is to compare Annual Percentage Rates (APR’s) of different loans. If all other things are equal, the car loan with the lowest APR is the best deal to go with. Apart from this method, having up to date financial knowledge is a good idea as well as that way you may be able to negotiate prices (or cost of loan, that is, APR), based on the price of the car.
You must make a lot of decisions about financing your car, including answering these questions:
- Should you finance or pay cash as when you pay cash, you save finances. But if APR is less than the cost of saving, what should you choose then?
- What amount of initial installment would you need to pay? On the off chance that you make a higher installment and fund your vehicle for a shorter time frame, you don’t need to pay out so much money – which means, lesser cost of the loan.
- What amount will you pay every month? The amount of your regularly scheduled installment relies upon your credit sum, advance term, and the financing cost of your advance.
- For which duration should you keep your vehicle? Industry specialists claim that new cars devalue between 30 percent and 40 percent in the initial two years after they’re made. The cost of keeping the car (maintenance, depreciation, cost of repair, etc.) versus cost of paying off the loan, will be a deciding factor on whether you should keep the car or finish off the loan by offloading your car.
Let us make it easy for you, first, you agree to pay the agreed upon sum as down payment, in addition to a predetermined fund charge amid a predetermined timeframe.
Apart from getting a car loan, you may also contact a dealership directly. Dealership financing implies that you and the dealership get into an agreement. A lot of dealers in Pakistan have an agreement with a bank, to assist in providing car loans and car Ijarah (the Islamic equivalent to a car loan). You agree to pay the sum financed, in addition to a determined fund charge along a predefined timeframe. The dealership may retain the contract but usually, the loan is arranged and the agreement with the bank or the financial institution – which means you will be paying off the loan to the bank.
In terms of cost of the loan itself, if you were to compare an auto loan of a 3 years time period to a 5 years time period, you will find that the cost of the loan is higher when the duration is higher, even if the monthly installment is smaller. In most cases, the longer the loan’s term, the lower the monthly payments and the higher the finance charges.
Let’s evaluate the documentation and information that you would need, in order to obtain that car loan you always wanted:
- Proof of income: If you are a salaried individual, the bank will ask for your latest salary slip, and if you are self-employed, the bank would request an official letter from the bank that your company account is in, stating that you are a business owner.
- Salary/Income up to a minimum level: This minimum is usually up to 2 times or more of the monthly installment being planned out for your car loan. If it is less than that, you might have to renegotiate the duration of the loan.
- A clear credit history and a copy of your CNIC: The bank usually requests for a copy of your CNIC. That defines the residence you’re currently situated in, and helps them to find out about your credit history. If you are self employed, they may ask for your NTN number as well.
(The State Bank keeps track of all the loans you have taken out under your name (and your business’s name), and they are all tracked through your CNIC (and NTN Number). It’s called an Electronic Credit Information Bureau Report or eCIB. If the history is clear (no overdue loan installments), then you’re good to go and an ideal customer for the bank.)
- Details of the car and who you’re purchasing it from: This is usually to keep track of the car purchase agreement if its an old car, and further to have the tracker installed in the car. Usually, this is coupled with an insurance plan (you can compare that too by clicking here), to ensure that the car is always tractable and in case of any damage, the damage can be recovered from.
Almost all banks operating in the country offer car loans, all you would need to do is run a comparison as to the best deal that is available, and which helps you finance the car of your dreams!