The trend we are seeing today is that used vehicle ownership is decreasing over time. why? People are upgrading their vehicles every few years due to technological advancements. And this can be seen more in the millennial generation.
So what should lenders do in terms of financing?
– Estimate the residual value of your vehicle at the start of the loan term. – Bill the borrower only for the residual value (the difference between its value in a few years and its current value)
Example: Currently the price of a bike is INR 1 lakh. I’m looking to purchase a vehicle over a two-year period. The lender will estimate the residual value of the bike today and what the residual value will be in two years. If Estimated Residual Value = INR 45,000, the lender will only charge that amount (i.e. INR 55,000 plus interest in this case) during your tenure.
At the end of the two-year period, you have three options: 1. Return your bike and upgrade to a new bike without having trouble selling it. 2. Pay the balance in one lump sum to own the vehicle outright. 3. Continue to pay EMIs on the remaining amount of the vehicle for the next 12 or 18 months to extend the loan and own the vehicle.
What are the benefits for borrowers?
– Flexibility to use vehicles and upgrade to new vehicles. – The economics of not paying for the full value of a vehicle with the intention of using it for less time. – Convenience of owning a vehicle.
Say goodbye to traditional loan options and embrace new car financing options from lenders!
Interesting insights into car loans for lenders.
The trend we are seeing today is that used vehicle ownership is decreasing over time. why? People are upgrading their vehicles every few years due to technological advancements. And this can be seen more in the millennial generation.
So what should lenders do in terms of financing?
– Estimate the residual value of your vehicle at the start of the loan term.
– Bill the borrower only for the residual value (the difference between its value in a few years and its current value)
Example: Currently the price of a bike is INR 1 lakh. I’m looking to purchase a vehicle over a two-year period. The lender will estimate the residual value of the bike today and what the residual value will be in two years. If Estimated Residual Value = INR 45,000, the lender will only charge that amount (i.e. INR 55,000 plus interest in this case) during your tenure.
At the end of the two-year period, you have three options:
1. Return your bike and upgrade to a new bike without having trouble selling it.
2. Pay the balance in one lump sum to own the vehicle outright.
3. Continue to pay EMIs on the remaining amount of the vehicle for the next 12 or 18 months to extend the loan and own the vehicle.
What are the benefits for borrowers?
– Flexibility to use vehicles and upgrade to new vehicles.
– The economics of not paying for the full value of a vehicle with the intention of using it for less time.
– Convenience of owning a vehicle.
Say goodbye to traditional loan options and embrace new car financing options from lenders!
#vehicle finance #vehicle loan #loan #manispeaksmoney