Enjoy cheaper interest rates on select car models

NEW DELHI: High interest rates and falling sales continue to haunt the auto manufacturers and dealers alike. To cope with this, the two together, with auto financiers have come up with lower interest rate schemes on the selective models, to boost sales in the sluggish auto industry.
In an effort to woo customers, General Motors India is offering loans at the rate of 7.5% on all models of Chevrolet Optra and Chevrolet Aveo, Hyundai Motors India Ltd (HMIL) is offering loans for Santro at 8.99% now in Pune, after its national scheme ended last month and Ford India is offering loans at 9.9% on Ford Ikon and Ford Fiesta — as against the existing rate which is hovering around 14%. Others like Honda Siel Cars India Ltd is in talks with nationalised banks that offer loans at a comparatively lower rate.

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It's a win-win situation for all. While, customers can save anywhere in the range of Rs 1,000 to Rs 1,200 per month on their EMI on a loan of Rs 3 lakh for a period of three years, auto manufacturers expect to see a spurt in sales and financiers can expect more customers walking in afresh.
This despite the fact that the trio — manufacturers, dealers and auto financiers — will have to put in around a substantial amount each to compensate for the lower interest rates. For GM cars, the total amount is in the range of Rs 15,000 to Rs 40,000, for Hyundai Santro over Rs 30,000 while for Ford cars, it works out to be Rs 30,000 to Rs 40,000.

While the banks are doing this by lowering interest rates by 100 basis point, dealers will do away with commission and the manufacturers may let go of free insurance schemes during the offer period. "Schemes like this always worked out to generate volumes in a sluggish market. As such the difference is compensated once the sales starts picking up," says P Balendran, V-P, GM India.
According to a banker, the move will enable manufacturers and dealers to liquidate stocks along with enhancing number of buyers at outlet.
And this is just the beginning. With no relief in sight, the manufacturers are set to either review schemes or come out with more offers to revive sales. "Industry will continue to witness a 12-15% dip in sales over the next two months with sales expected to pick up only in September," says Balendran, adding that the company might review its current offer once it ends in June.
"Since a very high percentage of cars are financed, the rise in interest rates does lead to a slowdown — at least temporarily. But we are optimistic of greater volumes in days to come," says Arvind Saxena, V-P, HMIL, adding that more such packaged are likely at the regional level. "The spate of interest rate hike has squeezed the customers who are the feeling the heat at all ends," added Arvind Mathew, MD, Ford India.
yogima.seth2@timesgroup.com