Car loans get costlier, hit double mark
Car loan lenders have raised the interest rates in the past couple of days by anything between 50 basis points and 100 basis points (100 bps = 1%)
. Notably, the rates have touched the double-digit mark after a long gap.
Dealer sources said that all private lenders have effected the hike late last week. "The increase differs for every model. For instance, rack rate on loans for a B segment (compact car) will now be 12% while a C segment (sedan) would be charged 11.5% for loans ranging from three to five years. Except for PSU banks, almost all lenders, including Kotak, ICICI and HDFC Bank, have informed us about the hike," a dealer said.
"We have increased loan rates for new and used cars. Our net rate to customer would range between 10.5% and 11.25% depending on the tenor and model," said Sumit Bali, CEO of
Kotak Car Insurance.
Though some dealers believe the increase in rate might dampen car sales, manufacturers maintain that the current hike would be absorbed by the market. "The growth momentum is strong and this hike may not impact sales. However, another hike might spook the sentiment and potentially dampen new car sales," P Balendran, vice president, General Motors said.
Bali of Kotak said the industry will continue to grow as the undercurrent remains bullish and strong. "With the festive season round the corner manufacturers are looking at robust sales. We hope there aren't further interest rate shocks from lenders which could affect sales. For now, we feel sales momentum would be maintained," Arvind Saxena, director, (sales and marketing), Hyundai Motor India told TOI.
The increase is also applicable to used car loans. "The new rates for used car loans, depending on the age and model of the car will now be 16% (indicative), which is a 50 basis points increase. We effected these hikes on August 23," Bali said.
HDFC Bank has raised rates for new cars to 11.25-12% from 10.5-11% effective August 20, other private lenders have followed suit. "As of now, we still lend at old rates, while there are talks of a hike anytime," a Maruti dealer in Chennai said. Passenger car sales are up. The industry witnessed 37.95% growth in July.
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