Buying a new car is a great experience, especially for first-time buyers. However, the skyrocketing prices of new cars are enough to leave many of us disappointed.

Buying a new car may not suit everyone’s budget, and this is when used cars or pre-owned cars come into the picture. They are affordable and available in different models without weighing down your budget. One of the main reasons potential car buyers look out for used cars over new ones is because of the relatively inexpensive registration costs, ready availability of  car loan and insurance charges.

After deciding to purchase a new car, the next big step includes ensuring you have the necessary funds to pay for the same. This could either be through cash or a pre-owned car loan depending on your current financial situation. Most people opt for the latter because of the flexibility with which it helps them manage funds.

Consider the below-mentioned pros and cons of a pre-owned car loan before choosing to finance your used car.

Pros of a used car loan

Ready availability of loans
Pre-owned car loans are available at competitive interest rates, thereby taking any possible monetary burden off your shoulders. The good news is that since financers provide this type of loans without complicated terms and conditions, the payment procedure is bound to be hassle-free.

Convenient repayment schedule
The most important factor associated with a used car loan is the flexible repayment option. Availing of a pre-owned car loan eliminates the need for making a large transaction at one go. This ensures you maintain your financial security and also gives you time to replenish your monetary reserves through EMIs.

Complete ownership without delay
On completing the loan repayment process, there are no further hurdles in the way of gaining absolute ownership of the used car. You are also free to decide what you want to do with the car. Whether you want to replace it with another one or put it up for sale will be your choice.

Although, a used car loan has an attractive set of features, you need to be aware of a few drawbacks of this loan.

Cons of a used car loan

Risk of losing ownership
The car you drive around is not completely yours until the financer that paid for it is not compensated in full. This means that although you may have the car parked in your backyard, the financer is the actual owner until all payments are made on time. Failing to make timely payments will from ownership of the car as well as have a negative impact on your credit history.

Increased interest rates
The next thing to beware of is high used car loan interest rates. In contrast to a new car loan, a pre-owned car loan could have 2% higher interest rate than the former. Another thing that a financer takes into consideration while deciding the interest rate to be charged includes contextual factors like age of the buyer, the type of car model, year of manufacture besides others. However, this drawback is not a high-risk one, because of the competitive interest rates provided by financers these days, which makes a pre-owned car loan worth opting for.

If you don’t have immediate cash at your disposal, but do not want to delay the purchase of your very own car, the aforementioned used car benefits and drawbacks will help you make the right decision.

Sponsored post by Mahindra Finance