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2006-10-04
AUTO LOANS: To Know Some Real Facts
 
Remember Lambretta scooters? You had to pay extra for seats since they were in the optional accessories list. And if you decided that it was time that you booked a car for yourself, you would have to wait a year or two before your Amby or Premier actually reached at your doorsteps. And with a better spectrum of cars to choose from, you have an even better spectrum to finance your buy. Of course, there are the dealers, manufacturers, easy car loans; all out there to make car-buying like a walk in the park. However, the biggest catalyst has to be Financial Organizations.

Now why would you want to avail of a loan rather than buy your wheels outright? Thank the low interest rate regime. Compared to rates in 1996, when interest on car loans was over 30 percent, the present rates are less than half of it. Over the last year or so organised finance penetration has increased. There is an vast expansion on operations to the smaller markets because there is a huge potential that is yet to be tapped. Interest rates are very attractive and this will surely bring in more customers. Commercial vehicles also has good in business.

The retail finance pie is expected to grow at 30 percent at the present interest rates. Interest on cars is in the range of 7.5 percent to about 10 percent. Industry sources feel that the interest rates are among the lowest as compared to other countries and that there is not much for further cuts. There may be a rise of 0.5- 0.75 percent in the future, but still it will be difficult to predict the exact movement.


"Repayment of loans across the industry has improved. This has been due to the increase in spending power of the buyers as well as lower interest rates." ICICI Bank has expanded its reach to cater to smaller cities and towns. The bank has planned a higher growth this fiscal and hopes to outpace the industry. State Bank of India (SBI), the other major player in this business is looking to better its previous year's growth of 38-40 percent. It is going all out to capture a larger share of the market.

What bankers are happy about is the new trend in car sales wherein the shift in customer preference for bigger cars has been distinct. Moreover, with new models being launched with greater frequency, the market response has been phenomenal. "Over the last year, the introduction of some new products like the Getz, the Indigo Marina and the Innova. But they have not quite managed to create a frenzy like the Swift did. The equation is simple: new products mean greater demand. And this suits the financiers well.

The spending power among those in the 26-35 age group has increased considerably. More so in centres where services businesses - especially IT and ITES - are very strong. Their preference is for cars priced over Rs 4 lakh, which is much higher considering the fact the largest selling; the Alto is priced a little over Rs 2 lakh. Also, many people are going for the B+ and C segment cars in the larger cities. This has resulted in a huge opportunity for the financiers, But will this trend continue for long? "Every trend will go through ups and downs. Today banks are able to lend at low interest rates because the economy is doing well. But if there is a slowdown then of course sales will be hit and FIs will be forced to hike their rates to tide over the rough times. What is significant though is that the financiers are aware of these situations given their global exposure. They will be able to cross subsidise some loans with others.

However, the present fiscal is expected bring about some changes in the customer preference due to fuel prices. Many banks have entered into tie-ups with leading manufacturers to provide finance to their products. The SBI-Maruti alliance was the one that started it all. Easily available and cheaper credit and increasing income levels have boosted the financing industry.
posted by Joby @ 5:38 PM   1 comments
 hello
1 Comments:
  • At 3:48 PM, Blogger madhura joshi saidâ?¦

    I am totally agreed on your each and every fact in car loan.Today no one can buy a car without taking a car loan and its very important for us to know the real fact in car loan interest rates.

     
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