Posted in Buy a Car

Buy Your First Car with Zero EMI

Many times, individuals have to postpone the purchase of a new car because they are unable to save enough for the same. Your prized possession should not burn a hole in your pockets. Considering the number of loan options available, purchasing a car has become easier.

Most banks finance about 80% of the value of the car, which means remaining 20% will be your down payment. The equated monthly installment (EMI) will have to be paid each month and it will be a fixed outgo from your monthly salary. So is there a trick to own a car without having to do this? Read on to find a way out.

Replace EMI with SIPs

Purchasing a car is not an overnight decision. It requires adequate financial discipline, planning, and market research, with the help of which, it can be possible to save enough to buy a car in the next five years.

When you seek a car loan, you will be required to pay EMIs for the next four to five years depending on the tenure and the amount of EMI settled with the bank. Instead, if you choose to start a Systematic Investment Plan (SIP) and invest regularly for these years before you plan to get your own car, you will have enough returns to accumulate the amount needed to buy a car. EMIs carry an amount of interest as well. With an SIP, there will be no additional amount you will have to pay. On the contrary, by investing in mutual funds, you will be able to earn enough to save for your car.

How mutual funds work

If you are wondering how mutual funds work, then let us tell you that mutual funds are managed by fund managers who collect money from investors and invest the same in order to generate higher returns. The fund manager tries to make the most of the investment and ensures that the risk is reduced to a minimum. It is a mix of debt and equity. The rate of return depends on the market volatility.

Advantages of mutual funds

Although market volatility does affect mutual funds, investing in them ensures you a high rate of return at a low-risk rate. Some of the primary benefits of mutual funds include the following:

  • Invest as an SIP

An SIP is an investment into mutual funds that enjoy a higher return and lower risk. A regular monthly investment will ensure that the returns at the end of the investment period are high. Since the portfolio will be diversified, the investor enjoys a lower risk and the returns can be as high as 15%.

  •  Enjoy liquidity

It is possible to get in and out of mutual funds with ease. In case you seek immediate liquidity of funds, it is possible to achieve the same. There is no lock-in period and you will receive your funds in no time.

  •  Avail of low transaction cost

With an SIP, the overall cost of a transaction will be low. Since new units are purchased each month, the total cost of purchase will come down. It allows transactions on a large scale but with less money.

With a regular SIP, you will be able to purchase the car without a bank loan and might also get an opportunity to buy a higher model. Right financial planning and decision making will help you save on the EMI and offset the car purchase with SIPs. There are a number of mutual funds in India for you to choose from. If you are a new investor, contact the fund manager to learn more about mutual funds.