Question

In: Finance

If you wanted to finance a new car, would you apply to a finance company or...

If you wanted to finance a new car, would you apply to a finance company or a commercial bank? What are the advantages and disadvantages of either choice?

Solutions

Expert Solution

Financing from a finance company, can be applied to many ones, but
commercial bank car loan can only be applied to a single one.
The main difference between both kind of finance is:
FINANCE COMPANY COMMERCIAL BANK
Lower interest rates Choice between various rates schemes.
Commission of salesman makes interest rate up. No salesman commission involved.
Finance terms typically for 3 years. Choice of tenure 1-7 years
Down payment is essential No case of down payment
Benefits:
Less paper work Good amount of formalities
Choice between various financers Choice between various interest rates terms
Negotiation of price exists Negotiation between loan terms exists.
Drawbacks:
Eligibility of good credit Car mortgage
Schemes available with costly cars Schemes for all classes of cars.
Down payment essential Higher interest rates to other finances.
DECISION:
Of the finance co. and commercial bank, the loan from the commercial bank is more
appropriate because of longer loan tenure which makes the EMI a small one, which
is more acceptable by middle level income car seakers. Also, no down payment is
essential so more appreciated than other finance companies.

jeff jeffy answered 2 years ago
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