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Planning to buy a car? This may be as good a time as any. According to auto finance experts, passenger vehicle financing rates are now the lowest in 10 years. Following the rate cut in January, the lowest interest slab has now gone down to 8.75%. Even mass market cheap and cheerful models are now available in the 9.75-10% range. All of which means, the interest rates are now back to January 2006 levels. "There have been two or three rate cuts in the past one year which have made the rate regime very attractive for customers," said Ashok Khanna, senior executive vice-president and business head, vehicle loans, HDFC Bank.

"Currently the super luxury segment vehicles attract around 8.75-9% rates, mid-size sedans like Honda City or Maruti Suzuki Ciaz around 9.25%, B-segment premium hatchbacks like Maruti Suzuki Baleno, Hyundai i20 around 9.5% and entry level cars like the Maruti Suzuki Alto around 10-10.25%. At this level the rates are lowest in recent memory," added Vyomesh Kapasi, CEO, Kotak Mahindra Prime.

Just how much have the rates come down? Back in January 2006, B-segrack rates hovered around 10-10.25%. For bigger mid-size cars, the rates were 9.5%-10%. By summer of 2007 the interest rates had jumped to 14.75% for an entry level compact car like the Alto and 14.5% for bigger cars, a 5% markup in 12 months. Rates stabilised a bit in the next couple of years and by February 2011 the rack rate range spanned 11.5 to 13.5% depending on vehicle type and loan tenure. That came down just a tad in the next 19 months - by September 2013 the rack rate or official rate on offer was anywhere between 10.5-11.5% depending on down payment, loan amount and credit history.

A year on competitive pressure led to rate reduction with the lowest slab coming down to 10% for banks and 9-9.25% for some NBFCs by September 2014. Of course, big volume mid-size cars continued to attract higher rates at around 10.5-10.75% while entry level hatchbacks came in at 10.75-11.25% Repeated rate cuts in the next one year by the RBI led to more rationalisation and the rack rates hovered around 11-11.25% for entry level cars, 10.5% for B-segment cars, 10.25% for C-segment sedans and 10% for premium cars by September 2015.

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Publication:Pakistan & Gulf Economist
Date:Feb 19, 2017
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