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.