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Drive away your dream car at lower rates

to deal with decreased volume in car loans and sales, interest rates and prices dropped

Apnaloan.com Research Bureau

10 Aug 2007

Mumbai: With car sales hitting the slow lane in the past few weeks, vehicle manufacturers, financiers, dealers and direct selling agents (DSAs) have come together to lower interest rates on auto loans.

The effective interest rates to the customers have dropped by as much as 4.5% in some cases because of these new schemes. Two of the biggest manufacturers Maruti Udyog and Hyundai Motor India have roped in major car financiers to offer customers loans at discounted rates.

Other car makers like Ford India have also started off talks with financers. Hyundai was the first manufacturer to kick off a discount game when it started offering loans for its flagship model, Santro Xing, at 8.99%. India's largest car maker then stepped up to the challenge and tied up with some of the bigger financiers like ICICI Bank and HDFC Bank to offer car loans at 7.99%. The scheme is available on Maruti's top selling models Alto, Wagon R and Swift.

However, Maruti says the scheme is more a local arrangement and not a national level tie-up with the financiers. A company official also said its sales have continued to grow substantially despite the interest rate damper. Car makers are taking Rs 12,000 to Rs 18,000 off the ex-factory price, depending on the region and the vehicle model.

In some cases, manufacturers are offering higher discounts which could effectively either reduce the interest rates or bring down the down payment made by the customer.

Financiers are also doing their bit by dropping interest rates by around 25 basis points (0.25%). Direct selling agents (DSAs) employed by private sector banks are also doing their bit by ploughing back around 3.5% against 2% before. DSAs get around 4.5% in subventions from financiers.

The effective interest rate for customers, which was around 12.5% (after taking into consideration various discounts and subventions) in March, has no



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