How the Rich Save Lakhs on New Car Buying Using Car 🚗 Loans (and You Can Too)
Here’s how — with a real example showing how you can save ₹1–2 lakh (or more) just by changing how you think about car finance. #CarLoan #PersonalFinance #MoneyHabits #SmartInvesting #FDOverdraft #WealthMindset
Most middle-class buyers dream of buying a car without any loan. But the rich? They often take a car loan intentionally — not because they can’t afford it, but because they understand how to make money work smarter.
The Middle-Class Way vs The Wealthy Way
Middle-Class Thinking💡:
“Let’s save money, avoid EMIs, and buy the car in full.”
The Wealthy Thinking💡:
“Let the bank’s money buy my car, while my money earns interest.”
It’s not about showing off — it’s about financial leverage. The rich don’t rush to pay cash when a loan is cheaper than the return they can earn elsewhere.
🏦 How the Trick Works
Let’s say you’re buying a car worth ₹15 lakh (on-road).
You have ₹15 lakh in savings — you could easily pay upfront.
But instead, you do this 👇
| Step | Action | Amount | Return / Cost |
|---|---|---|---|
| 1️⃣ | Put ₹15 lakh in a Fixed Deposit (FD) | ₹15,00,000 | 7.25% annual interest |
| 2️⃣ | Take a Car Loan or Overdraft Against FD | ₹15,00,000 | ~8.25% interest (loan against FD is usually +1% higher) |
| 3️⃣ | Continue earning on FD while paying slightly higher interest on loan | ₹15L earning @7.25% vs paying @8.25% | |
| 4️⃣ | Net cost = 1% interest difference | ₹15L × 1% = ₹15,000/year |
So, instead of spending ₹15 lakh immediately, you pay roughly ₹15,000 per year in net interest — and your ₹15 lakh stays safe, growing, and liquid in your name.
Real Example: How Much You Save
Let’s compare two people who both buy a ₹15 lakh car.
| Buyer | Method | Outflow | Net Benefit After 3 Years |
|---|---|---|---|
| A (Cash Buyer) | Pays ₹15L upfront | ₹15,00,000 | ₹0 balance left |
| B (Smart Buyer) | Keeps ₹15L in FD @7.25%, takes overdraft @8.25% | Pays ₹45,000 interest in 3 years | FD earns ₹3,26,000 interest |
| Net Savings | ₹2,81,000 profit |
So, even though Buyer B paid some interest, his money kept working — and he ended up saving nearly ₹2.8 lakh over three years.
💡 Let’s assume:
- Car price: ₹15,00,000
- FD interest rate: 7.25% p.a.
- Overdraft (OD) interest rate: 8.25% p.a.
- Duration: 3 years
Simple comparison without compounding for simplicity:
Step-by-step Calculation
🏦 1. FD Earnings in 3 Years
If you put ₹15,00,000 in an FD at 7.25% p.a.:
Interest per year = ₹15,00,000 × 7.25% = ₹1,08,750
For 3 years →
Total FD interest = ₹1,08,750 × 3 = ₹3,26,250 ✅
(That’s the “₹3,26,000 interest” figure mentioned earlier.)
💳 2. Overdraft Interest Cost
You take an Overdraft against FD (not a standard car loan).
Interest rate = 8.25% per year
Interest per year = ₹15,00,000 × 8.25% = ₹1,23,750
For 3 years →
Total interest = ₹3,71,250
🔍 3. Net Difference
FD earns ₹3,26,250
OD costs ₹3,71,250
So the net loss = ₹45,000 (approx. 1% difference × 3 years)
But here’s the trick:
- You still own your FD (₹15,00,000 principal intact).
- You only spent ₹45,000 (the cost of borrowing).
- You kept liquidity + investment continuity + credit score benefits.
🧠 Why It Still Makes Sense
- Your ₹15L stays intact and growing (earning interest).
- If your FD matures, you can redeem anytime to close the OD.
- You can use OD partially, so interest applies only on what’s used.
- You get flexibility without locking your money into a depreciating car.
🌱 Summary
The ₹3,26,000 figure is the total FD interest earned over 3 years,
and the net benefit is that you retain your entire principal (₹15L) while paying only ~₹45K for 3 years of liquidity and ownership.
Bitveen Admin
💰 Why This Strategy Works
1️⃣ Loan Against FD Has Lowest Interest
Banks like HDFC, ICICI, SBI, Axis offer Overdraft or Loan Against FD with just 1% higher rate than the FD itself.
2️⃣ You Pay Interest Only on Used Amount
In an Overdraft, you can pay back anytime — interest is charged only on the amount and duration used.
3️⃣ Your FD Keeps Earning Interest
Even though it’s “pledged,” it continues to earn regular FD returns — and stays in your name.
4️⃣ Liquidity and Safety
Need money urgently? Cancel the OD and access your FD anytime — no loss of ownership.
🚫 When This Strategy Doesn’t Make Sense
- If your FD rate is too low (<6%) and car loan rate is high (>9%)
- If you don’t have a stable monthly income for EMIs
- If the car loan is for luxury cars (where depreciation beats any benefit)
But for cars under ₹20–25 lakh, especially when you have idle funds — this is a smart financial move.
🧠 The Wealth Mindset
Wealthy people never let money sleep.
They believe in using money to make more money, even for things that depreciate — like cars.
Instead of emotionally saying “I’ll never take a loan,” they ask:
“Can this loan help me save or earn more in the long run?”
That’s not greed — that’s financial literacy.
❤️ Final Thought
Buying your dream car isn’t just about horsepower — it’s about smart financial power.
You can either park your money in the car and let it lose value every year,
or park it in a place where it keeps working for you, even while you drive.
So next time you think of buying a car, remember — sometimes, the rich drive smarter not faster.
⚠️ Disclaimer
This article is for educational purposes only and not financial advice. Interest rates and bank terms vary — please check with your bank before making any investment or loan decision.
Bitveen Admin