Disadvantages of full loan scheme
Many people like the idea of buying car on full loan also known as zero downpayment loan scheme. But they never realized the underlying disadvantages that the scheme brought to them in the long run. A few of them I highlight below for us to think about:
1. High interest
When buying car using the zero downpayment scheme, the buyers will definitely incur high interest, especially if the financing period is long. The higher the margin of finance, the more interest are incurred.
2. Difficulty in changing cars in future @ trade-in
The worst nightmare for car owners is being not able to change old car to new ones or termed as trade-in. This especially so, when the outstanding loan @ loan settlement figure is still very high as compared to the current market value of the particular vehicle as a result of high margin of finance. Cars value depreciate very fast in the initial 3 years of up to 45%. So, when you want to change cars @ trade-in for new one, you need to top up the difference between the outstanding loan against the current value. In some cases, even after 3-4 years of ownership, you still need to top up around 5,000-6,000 in order to get rid of the old cars. And then again, the amount is exclusive of the downpayment for the new cars, which means you need to come up with another 10% of the price of the new car as downpayment. It is actually possible to get the new cars without downpayment, but considering the after effect, it is better to put some amount as downpayment.