Car purchase finance options

Financing a car purchase has become rather easy these days. In recent years, a whole lot of financing options have emerged for the potential car buyer. Here we list a few options.
Loan: One of the more famous ways of buying a car is through a car loan. In this case, the car bought through a loan is actually in the possession of the lending institution. The official term used here is "hypothecation clause", which basically means that though you own the car, the bank/lending institution is using the car as a security against the loan taken by you. Thus, once you have cleared all the dues, this clause is removed from the agreement. The self-employed can get tax relief on the interest paid for the car loan (approximately 15 per cent). Also, depreciation to the tune of 10 per cent per annum can be claimed depending on the price of the car.
Hire purchase: In this format, the lender actually buys the car on your behalf and sells it to you on hire purchase. In other words, you hire the car from the lender and own it once you have settled the dues. The self-employed can get tax relief on the interest paid for the car loan (approximately 15 per cent). Also, depreciation to the tune of 10 per cent per annum can be claimed depending on the price of the car.
Lease: In this case, the car is owned by the financier and leased out to you for a monthly installment, which includes both principal and interest payment. At the end of the lease period, you become the proud owner of the car and the financier transfers the car in your name. The self-employed can get tax relief on the interest paid for the car loan. However, no depreciation can be claimed as the car is owned by the financier.

Differences between motor insurance policies

Motor Policy A: This insurance policy covers personal injury and property damage caused by your car. The parties covered under this include:
Pedestrians, occupants of other vehicles etc except those within your vehicle.
Driver of the other vehicle .
The passengers with whom your vehicle is for hire. Here, the owner of the vehicle gets an insurance cover on third party property damage only in case of an accident. In other words, if you are in an accident, the affected party can claim damages from you. The premiums generally are dependent on the cubic capacity of the car.
This cover does not go to fire and theft accidents, for which you need to pay additional premiums. Motor Policy B: The premiums of this comprehensive insurance? are much higher than those paid for regular insurance cover. This type of policy covers both third party insurance and own damage liability. Covered under this policy are:
Loss or damage to the vehicle caused by environment as well as other reasons. That is, accident, fire, explosion, lightning, theft and other malicious acts are covered under this policy.
Damage to the vehicle while it is under transit.
Risks due to natural/man-made calamities like floods, earthquake, riots, strikes and terrorism.
Damage to accessories like car stereo, car AC and other items that are not part of the original equipment.

Old car or new?

This is totally dependent on your mentality. And of course, there is a price differential. So, it is better that you identify your needs first and then take a call on the one that suits your purposes.
For instance, if you are someone who is looking for a regular upgrade in say, every two-three years, then a second-hand car makes sense. Moreover, if this is your first car and you are trying to learn driving on it, a second-hand car definitely makes much more sense. On the other hand, if you are someone who is happy using the same vehicle for a number of years, then a new car is definitely recommended.
Of course, there are other important parameters like your negotiating skills and the previous owner. For instance, a Parsi owned car commands higher value as Parsis are known to maintain their cars very well. As a Parsi friend confesses, We do not believe in repair? we replace.? Whereas even the latest model in the hands of a Young Turk (a la Schumacher) would create imageries of burning tyres and engine on an overdrive.
Before buying any car, here are a few things you need to consider:
1. What is your budget for the car?
2. What is your monthly budget for the car?
3. How do you intend to use it? Within the city or even outside the city? (Heavy weight age towards the latter means that you need a MUV or multi-utility vehicle like Tata Sumo, Mahindra Bolero etc.)
4. How long do you intend to keep the vehicle? Now that you have answered the above, you know whether you want a new or an old car. But before you go for that old car, get yourself a cool car mechanic that is, a trustworthy one who will check the car for you. Ask him to check all the parameters like tyres, suspension, cooling etc.

Important clauses of auto insurance policies:

The vehicle insurance cover is not applicable if there is consequential loss, depreciation, wear and tear or mechanical and electrical breakdown. It is also not applicable in the following cases:
Drunken driving

Driver does not hold a driving licence

More people in the vehicle than the capacity permitted by the RTO

Damage incurred in a war zone.