Wednesday, June 27, 2012

Car - Buy Vs Finance

Here is the expert view on whether to buy car or finance : 

The question whether to buy a car by paying cash or taking a loan is not as simple as it sounds. In case you don’t have enough cash, it becomes easy to answer as you don’t have an option but to go for a loan. Also, any future need of money can also help in deciding the same.

But in your case it is not applicable as you have enough resources. For you the determining factors can be whether your company has a “company car lease policy”. If yes, then opting for the same is recommended as the car is purchased in the company’s name and EMIs are adjusted from salary thereby making salary structure more tax-efficient. Further, check if there are special deals in the market which makes going for the loan more attractive. If not, then taking a loan will not give you any advantage as you will be paying a high interest on the loan and your cash surplus will not be able to deliver you an equivalent interest amount. ( SOurce - Ask Mint Money, Mint )

Fully agree with the expert to go ahead & buy ( with extra 'cash discount'), if one can afford. But then, car is usually bought in India thru finance, mostly  due to the non-affordability factor. 
Those who can afford, may still opt for finance to employ own funds elsewhere ( in business) and generate interest. The perception is also, it helps 'tax planning' ! ( don't think it has changed much!)

Sadly, lease & rent-a-car have not developed here as much as in other big markets.

Happy & safe Driving !

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