Decoding the deals on Volkswagen cars

Should you choose the cash-discount or the low interest offer?

Volkswagen’s low-interest rate offer on Polo petrol is so tempting that you are better off keeping your money in bank and availing the loan offer.

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Volkswagen Polo Petrol: ‘keep your money in the bank’

Volkswagen is offering two types of discounts on Polo’s petrol models:

One, you could either get Rs. 15,000 in cash discounts plus free insurance plus Rs. 20,000 in exchange bonus or,

Two, you could get yourself a three-year loan at an interest rate of 5.99 percent plus free insurance.

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So, assuming you are in the market for Polo, which one should you take?

Let’s take the case of Polo Highline which is priced at Rs. 5.84 lakh. Assuming you go for 85 percent loan, you will save Rs. 46,800 over three years—compared with what you will pay if you were to borrow at market rate of about 12 percent.

Savings in cash discounts are only Rs. 15,000.

But what if you want to make the down payment?

If you must, then your only option is cash discount.

However, even if you have the money, you are better off keeping it in bank and taking the loan. At an interest rate of 9 percent, Rs 4.96 lakh (the amount equal to loan amount) will be become Rs. 6.42 lakh—a gain of Rs. 1.46 lakh. And you will pay an additional Rs. 91,000 as interest on loan amount.

Put simply: if you keep your money bank and take the loan at 5.99 percent, you will still save about Rs. 51,000.