Vehicle loans are expensive but should you be prepaying them?
Common Indian sentiment is that loans are bad so prepay them as soon as possible. But that needn’t always be the right decision.
Certain vehicle loans give us tax benefits like EV loans, you can claim up to Rs 1,50,000 of interest as a deduction under section 80EEB. This brings down the effective interest rate of the loan, making it much cheaper than what’s shown in its face value.
Business owners and self-employed who purchase a vehicle for their business and profession can claim the entire interest on the loan as an expense against their total income. Making it very lucrative to take long-term loans.
Another added benefit to buying a car for business purposes is that you can claim income tax depreciation on the vehicle. Essentially claiming 15% (40% for EVs) of the value of the car against your income as an expense. However, this will not affect your effective interest rates.
P.S. I’d rather not take a vehicle loan, just take a cab everyday and invest the cash you would have invested on a car.
.
.
#financewithsharan #vehicleloan #carloan #electricvehicle #money #personalfinance #invest