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High interest rates slows down vehicle finance

Demand for auto loans falls due to high interest rates

Apnaloan.com Research Bureau

30 May 2008

This fiscal demand for auto loans will curb due to high interest rates. According to senior bank officials finance for new cars dip will grow at 10 per cent in 2008-09, down from 12 per cent in 2007-08.

As reported by Business Line, according to Mr Manoj Mohta, Head-Research, Crisil, the launch of Nano might result in some de-growth in the mini car segment. Interest rates might also have a slight upward bias on account of concern on the asset quality and the regulatory environment, thereby affecting the finance.

This slowdown may be short-lived (two-to-three months), as the introduction of new models will boost the demand for new vehicles, thereby keeping the vehicle finance market buoyant.

The growth in car finance will be driven partly by higher price realisation and partly by strong volume growth in the compact and premium segments on account of new model launches.

There is generally a slowdown when rates go up. However, this would be offset by the demand for vehicles, and manufacturers will want to tap the market. They will, therefore, try to step in and give some kind of benefit to customers in terms of a marketing programme support, a subvention or credit facility.