The idea of owning a car of your choice for the first time can be quite satisfying, but make sure you do the math before you invest. Understand your cash flow and find out what kind of financing are available from your bank or what kind of loans would you be eligible to avail from a bank.
Vehicle loans were much relaxed before Bhutan experienced an acute shortage of Indian rupee in 2012. Later, in a bid to curb rupee outflows, car imports were banned. After two years, the government officially lifted the ban on import of cars in July 2014.
Today, while banks have started to provide vehicles loans after two years of ban, the conditions are different. There are various factors one needs to know before investing in a car.
If you are looking to invest in a car that costs Nu 800,000 or below including all taxes, a bank will normally cover only 60 percent, which means, you will have to look for other ways to raise the additional 40 percent of the cars cost.
If the car costs more than Nu 800,000, the bank will finance only half the total price of your car. For used cars, banks will finance only 40 percent irrespective of the total cost of the car. Banks in Bhutan charge an interest rate of 10 percent to 14 percent for a maximum period of 5 years.
Once you have availed a vehicle loan, your car becomes your mortgage and you will be required to go for a comprehensive insurance of your car with one of the insurance companies.
Banks in Bhutan today are working out new methods to offer more choices and options to their clients. More and more banks are offering the choice to go either for fixed or floating interest rates.
This means, if you are cleaver enough and can understand the market, you have an edge over others. If you are availing a loan, which has a tenor of more than five years, you have the option to ask either for floating or fixed exchange rate.
Since vehicle loans mature in five years, you can thus opt for a fixed or a floating interest rate. In a fixed interest rate system, your interest rate continue to remain the same for five years, but in a floating interest rate regime, it can move up or down based on market conditions.
Therefore, floating interest rates are revised every six months. If market condition is bound to improve and work in your favor over a five-year period, then you may opt for floating rate, but if you feel it will only worsen, then you would have to opt for a fixed interest rate.