By Ankur Mishra & Akhil Vishwanath
In a bid to reduce cost of ownership, auto financiers are coming up with new products to provide close to 100% car loan. State Bank of India is currently working on a new car loan product where customers can avail loan of more than 85% of car value. PK Gupta, MD, retail at digital banking, told FE that there are certain auto loan products which SBI is working on. “A loan product where a customer can avail more than 85% of loan value is being examined by the bank. However, no final decision has been taken, as it is under discussion.” Currently, the bank is offering auto loan products where up to 80-85% of loan value is financed by the bank.
Similarly, ICICI Bank is providing loans of up to 100% price of the car. In a recent advertisement posted on its website, the bank said, “ICICI Bank offers car loans up to 100% of on-road price of the car for tenure up to seven years.” In December, the private lender launched a car loan scheme which helps customer drive a car home at a lower cost. ICICI Bank had joined hands with automobile leasing company TranzLease to provide this loan facility. Termed as ‘Smart EMI’, this scheme claims to offer cheaper EMI options compared with usual EMI schemes.
The Smart EMI scheme involves paying equated monthly instalments (EMIs) for 36 months or 60 months, depending on the option taken, along with down payment, insurance and taxes in the first year. The EMI includes the cost of maintenance throughout the tenure and insurance renewals. The scheme deducts the estimated resale value of the car upfront to reduce EMI. At the end of the tenure, the customer can either choose to buy the vehicle or surrender.
On December 11, Maruti Suzuki India, the country’s largest vehicles manufacturer, signed an MoU with Federal Bank to improve finance options for its customers and dealers. Earlier this year, MSI had signed a similar agreement with Bank of Baroda.
While the car maker looks to expand its customer base and open up new funding options for its dealer principals, Federal Bank looks to expand its presence across India along with growing its book value on auto loans.
Shashank Srivastava, executive director, marketing and sales, Maruti Suzuki India, said: “Considering that nearly 80% of cars purchased are financed by banks, Maruti Suzuki proactively reached out to banks and signed MoUs with banks like Bank of Baroda and Federal Bank. In addition, we have tied up with 33 private and government banks and seven regional rural banks.”
Dealers FE spoke to admit that last few months had been a little challenging with respect to arranging retail finance for consumers and inventory funding for dealers. Therefore, more of such products are being expected by auto loan financiers.
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