As the price of a new car is higher than the price of a used car, the loan amount of a new car loan is higher than used car loan. Banks offer new loans up to 85-100% of the ex-showroom or on-road price of a new car. Banks offer used car loans only up to 70-80% of the price of a used car.
As the loan amount for a used car is lesser than a new car, the interest rate for a used car loan is higher than a new car loan by 5-7%. Furthermore, lenders believe that providing a new car loan is less risky as a new car has better resale value than a used car.
The loan tenure for new car loans range from 1 to 7 years whereas for used car loans, it is 3 to 5 years. Thus, the loan tenure for a new car loan is longer than a used car loan. Car loan tenure is determined based on the age of the car and the loan amount.
EMI payments are smaller for new car loans as they have longer repayment periods when compared to used car loans. The EMI for a used car loan is higher than a new car loan as the loan tenure for a used car loan is comparatively smaller.
The down payment for a used car is higher than a new car as lenders are willing to lend a maximum loan amount of only half the price of a used car.
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