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  Friday, 20 July 2012
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Why is Used Car Finance done at higher Interest Rates against New Cars. I plan to Buy Used Car - As per dealer Interest Rate on Used Car Loan is in between 17%-18%. Whereas the similar New Car Model is done at 12%. I need to know why is such a huge difference
11 years ago
Hello Deepak,

Banks decide on Interest Rates basis Asset - Profile - Risk - Default Rate Mix.
As per our understanding - Used Car generally commands premium over New Car Loan Interest Rate due to below factors :-

- There are very few takers if one look to sell Sr. No. 2 Car . Its difficult to sell Sr. No. 2 Car than First Owner Car in the market. Banks generally determine this risk of further sale-ability in consideration.

- The past default rate also makes banks increasing pricing of used car loan

- The Process Note - In Used Cars - Earlier due to many cars been funded but the transfer process had many shortcomings due to which the major part ie. Hypothecation was skipped in the transfer RC - leading to more risk to Bank
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