Pros and Cons of Buying New Cars or Bikes on Installments
Over the past few years, car prices have increased significantly, with an average increase of 51% to 59% for some models. Atlas Honda Limited has increased the price of bikes by 47-70% for various models in the last 16 months, despite achieving more than 96% localization in the Honda CD-70cc model. Although there are many reasons for the price hike in the Pakistani automobile industry, only few peoples are buying new cars because of the price hike. And they remains with the choice of buying on installments.
There are two types of people who finance their cars – those who can’t afford it for a while and those who can afford it for a while but don’t want to for some reason.
Whatever category you are coming in, whether you want to buy a new car or some pre-owned, this blog is for you.
Should You Buy Car or Bike on Installments?
Like anything else in life, car financing has also pros and cons. So let’s see if you should buy a on installment or if it makes more sense to pay full up front.
Pros of Buying New Cars or Bikes on Installments
Some of the benefits of car or bike financing are mentioned below:
- Instead of saving for months and years, you can get your dream car as soon as your car loan is approved.
- Even though your savings might be enough for a 1000cc car only, an approved car finance loan can get you a 1300cc car. So, one of the biggest benefits of buying a used car is being able to drive a bigger and better car.
- The cost of buying a car is now very high. In short, if you have to pay 30 Lakhs buy a car, it will take several months to pay off that amount (this is a simple way of explaining the advantages of car financing).
- Once you have completed the agreement with the lender and made your complete payments, you will own your car. Unlike a lease, you never own the car even after you’ve made all the payments.
- Even if you haven’t paid all the installments, you can still sell your car (if your contract allows it).
- Car financing can be cheaper to insure. Your bank or financial institution may offer special rates on car insurance that are lower than market rates.
As you can see, there are benefits to financing a car as mentioned above. However, it also has its drawbacks.
Also Read: How to trim your Fuel Expenses: Here are Top 10 Tips.
Cons of Buying New Cars or Bikes on Installments
The biggest disadvantage of buying car or bike on installment is paying interest, which increases the value of the car. What you pay will be more than if you pay all at once. But there’s a lot you need to know about the latest developments in State Bank of Pakistan (SBP) car financing.
- Financing your car today is more difficult than ever, and for many reasons. Here are some highlights:
- SBP has reduced your car loan repayment period from 5 years to 3 years if the car is above 1000cc.
- Reduced from 7 years to 5 years for cars up to 1000cc.
- Down payment requirements increased from 15% to 30%.
- Limit auto loan financing at $3 million.
- You can’t buy an imported car.
- You cannot change anything or modify in your car while it is financed. Because when you pay the bill, you don’t own it, the bank does. So, if you want to make any modification in your car, don’t finance your car.
- If you can’t make your monthly payments, your bank or lender can repossess your car. How long they can do this and what happens after the car is recycled will depend on your agreement.
So now you know that car financing also has its disadvantages. Is it better to buy on installment?
Also Read: 10 Best Cars Under 10 Lakhs in Pakistan (Model & Prices)