In this latest discussion, we take a look at the details of whether to buy a car on EMI or cash. Let’s examine the pros and cons of each approach. Purchasing a car is a significant event in one’s life. Individuals often go to great lengths to afford their dream vehicle. Many people opt for car loans, allowing them flexibility even if they don’t have the entire budget. However, this can lead to buying a car that exceeds their financial capacity, which may prove to be a mistake in the long run. Here, we will delve into the advantages and disadvantages of buying a car through a loan or with cash.
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Buy A Car On EMI Or Cash?
This video comes from Mettas Club Dr. Amit Maheshwari on YouTube. The prominent YouTuber often comes up with such content. He makes it a point to talk about only those things which he has experienced himself. On this occasion, he takes the example of his son. The latter demanded a Mahindra Thar on his 18th birthday. However, he wanted to pay the amount in full. That is when Amit sat him down and explained the economics behind both scenarios – buying the Thar with full payment of EMI. In total, the car cost him Rs 16.85 lakh, including the accessories. The first scenario is paying in full. There are no complications here. It is just that you have invested such a huge amount on an asset which depreciates from the moment you take it out of the showroom.
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In the other situation, he argues that they should pay a down payment of Rs 6.85 lakh and take a loan of Rs 10 lakh for the remaining amount. For a duration of 3 years, with an interest rate of around 8.75% (depending on your CIBIL score), you will end up paying an EMI of around Rs 31,684. Over the 3 years, you will pay a total interest of Rs 1,40,624, as per the YouTuber’s calculations. But in this case, you can take this loan but invest your own Rs 10 lakh in either FD or the stock market. Taking an average return of around 7.25% and 18%, respectively, he calculates that you will earn anywhere between Rs 2.4 lakh and Rs 6.4 lakh on your investment. That will be enough to offset the interest you paid on your loan and even get some more profit on top of that. Hence, if you have the money, going this route is also beneficial.
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Author’s Note
In inference, all these aspects are very individualistic. We must understand that the financial and personal situations of every person are unique. Therefore, there is no silver bullet. However, it is crucial to have access to such information and research well before making such a huge decision. You must know all the alternatives you have at your disposal. Thankfully, with so much knowledge available online, you can get acquainted with a new topic in a matter of minutes. Hence, you must apply caution and not get carried away by any particular person. Make sure to know all the specifics of these scenarios and make the best choice for yourself.
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