Car finance rates down to 13.5 per cent

Subhadip Sircar

Mumbai, Oct 8: With most major car manufacturers reporting a sharp drop in September sales, car finance rates have come down to low levels of 13.5-14 percentage points. However, car financiers believe that the rates have bottomed out and should not fall further.

Most auto companies have also entered into tie-ups with financers to offer substantial discounts to customers in order to boost sales.
According to Kotak Primus chief operating officer Pankaj Desai, “The lower interest rates are a combination of various factors, such as the general interest rates coming down, car sales not having picked up and increasing competition among car finance companies.”

The car finance rates have fallen by one percentage point in the course of the last three months to the current levels, he added.
Car sales witnessed a slump in September with market leader Maruti registering a 17 per cent drop — from 34,873 units last year to 28,745 units this time round. Even Hyundai has clocked an 18.2 per cent drop from 8,285 units last September to 6,781 units same time last month. General Motors India also saw a 30.6 per cent month-on-month drop at 800 cars as against 1,153 sold in the same month last year.

Resultantly, all the major manufacturers including Maruti and Hyundai have offered significant discounts to the customers. In fact, dealers say that companies are asking them to provide discounts on their own accord so that a higher benefit can be passed on to the customer.

Mr Desai points out that while Maruti is offering a discount of around Rs 4,000-6,000 across various models, General Motors India has launched an incentive scheme for financiers linked to volumes. Hyundai Motors India, has also launched a finance scheme for customers.

Fiat India, which has just launched its small car Palio in India is also lining up an aggressive financing strategy for the car through its arm Fiat Sundaram Auto Finance (Fisaf).

Fiat is offering aggressive finance rates of around 12-12.5 per cent for the Palio, lower than even the prevailing rates. The company is also offering flexible financing options to customers for the Palio.
These include maximum financing (except for registration and insurance charges) and options for low-income groups, according to a Fisaf official.