The cut in GST rates and banks financing up to 90% of a car’s on-road cost is set to nudge those planning an upgrade from a two-wheeler or looking to switch to higher models. Lower interest rates, nil processing fees by some banks and festive discounts will further sweeten the deal.
The cut in GST rates to 18% from 28% has led to a drop in prices ranging between Rs 40,000 to Rs 1,55,000 on cars and sports utility vehicles (SUVs) in the mass market segment.
Adhil Shetty, CEO of BankBazaar, says, banks financing up to 90% of a car’s ex-showroom cost and the cut in GST rates will fill the gap for households that were stretching to buy a basic car, enabling them to aim for better safety and comfort. “For two-wheeler owners, lower cost plus high loan coverage means a smaller down payment for their first car,” he says.
Festive bonanza
The festive season is a prime time for people to book their new vehicle. The benefits from GST rationalisation will also be an incentive for customers to even look at a higher variant for the same price.
Santosh Agarwal, CEO of Paisabazaar, says lenders provide financing up to 90% of the car’s ex-showroom price and a few even offer 100% financing for select car models depending on the eligibility of the borrower.
The reduction in car prices would result in lower down-payment requirements and monthly EMIs would also become more affordable. “It is in the best interest of buyers to review various car loan options online and choose the option that suits them the best,” she says.
Additional benefits
As part of the festival offers, banks give additional benefits such as zero processing fees, waiver of foreclosure charges, flexible repayment options, and even discounted rates for those with high credit scores. So a good credit score of 750 or above and careful reading of the fine print are key to ensuring savings aren’t eaten up by hidden costs.
Lower interest rates will help in savings. At present, state-owned UCO Bank is offering the lowest interest rate of 7.60%, followed by Canara Bank at 7.70%.
For a loan of Rs 5 lakh for 5 years at 7.6%, the EMI starts at Rs 10,043 per month. Canara Bank is offering full waiver on processing fees under its festival scheme till September 30, 2025 and IDBI Bank has also waived the fixed processing fee of Rs 2,500 until month-end.
Interest rates of private banks are higher than state-owned banks. ICICI Bank (9.10% onwards), HDFC Bank (9.20% onwards), IDFC First Bank (9.99% onwards), data from Paisabazaar show.
The credit score is the single most important factor in deciding the interest rate. A high credit score, preferably above 750, and a low EMI/net monthly income (NMI) ratio will make a reliable borrower.
Individuals should look at the total cost of borrowing and not just the interest rate. They must factor in tenure, EMI, and overall outgo to assess affordability. “Review the fine print for hidden costs like prepayment penalties, insurance bundling, or RTO charges,” says Shetty.