Financing an automobile without proper research can easily add ₹50,000 to ₹1,50,000 in avoidable financial losses. Here are the 7 biggest traps to steer clear of:

1. Accepting Dealer Financing Without Comparing Outside Banks

Dealerships often have commission arrangements with specific lenders. Always secure a pre-approved loan quote from your existing bank to negotiate the lowest interest rate.

2. Extending Tenure to 7 Years Just to Lower EMI

A 7-year auto loan keeps your monthly instalment small, but you may end up paying 45% of the vehicle value purely in compound interest.

3. Ignoring the Foreclosure & Part-Payment Clause

Check whether the bank allows penalty-free prepayments. Floating rate car loans are generally foreclosure-free under RBI regulations, while fixed-rate loans may carry a 3% to 5% charge.

4. Overlooking Hidden Processing & Documentation Fees

Always demand an itemized breakdown of processing fees, stamp duty, documentation charges, and CIBIL report generation costs.