In today's times, it has become quite easy to bring home your favorite car. Car companies and banks to woo customers 'Zero down payment'' Present the scheme. This simply means that you do not have to pay a single rupee from your pocket for the initial price of the car or the booking amount and the entire amount is financed by the bank.
This scheme is a great opportunity for those who do not have large savings immediately available, but have a good monthly income. However, it is not as attractive as it looks. Some mathematics and conditions are also hidden behind this. Is buying a car with zero down payment a better option, or can this deal prove costly? Come, let us try to find out.
Benefits of zero down payment scheme
- Savings remain safe: You do not need to spend your savings or emergency fund to buy a car.
- Immediate Delivery: There is no need to wait for months or years to collect the down payment. You can finance the car immediately by going to the showroom.
- Liquidity is maintained: The money you give as down payment, you can invest it somewhere else or save it for your other needs.
What are its hidden tricks?
The other side of the coin is that this scheme also comes with some additional burdens, which are important to understand. Come, let us look at these one by one-
more interest will be charged
Often, banks charge 0.5% to 2% more interest on zero down payment loans than normal loans.
Big EMI
Since you are taking the full value of the car on loan, your monthly installment (EMI) will be much higher than a normal loan.
Processing Fees and Taxes
Many times banks charge higher file charges or processing fees in the name of 'zero down payment'. Additionally, you may have to pay road tax and insurance in cash, which banks do not cover in 'Pure 100% On-Road' financing.
Smart tips to avoid hidden charges
If you have decided to choose this scheme, then keep these things in mind-
- On-Road vs Ex-Showroom: Clarify whether the loan is available on the 'ex-showroom' price of the car or on the 'on-road' price. Try to include registration and insurance in the loan.
- Fixed vs floating rate: Always check whether the interest rate is fixed or floating.
- Foreclosure Charges: In future, if you want to repay the loan prematurely, how much penalty will the bank charge? Check this in the agreement beforehand.
- Credit Score: The better your CIBIL score, the more discount you can get in interest rates.
Our advice: Zero down payment scheme is best for those who have a strong cash-flow position but have not been able to raise the lump sum while purchasing a car. However, in the long run you pay more in interest. Therefore, read the fine print carefully before signing the deal. If possible, you can reduce the loan and interest for the future by making as much down payment as possible.