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Auto loan rates to rise

Auto loan rates to rise by 50-100 bps

Apnaloan.com Research Bureau

01 Jul 2008

Buying a new car will get costlier from this week. According to car dealers, ICICI Bank, HDFC Bank and Kotak Mahindra have all lined to hike rates by 50-100 basis points (bps).

As reported by Economic Times, according to Kotak Mahindra Prime CEO Sumit Bali, the Company has decided to effect a 75-100 bps hike from July 1. Whereas HDFC Bank is planning a 50 bps hike.

Interest rates on small cars are 13.5-14.5% while for mid-sized models it is 12.75-13.5%. A 100 bps hike pushes up the EMI of a 3 year, Rs. 4 lakh loan by Rs. 50 per lakh or Rs 200 per month. That works out to around Rs. 2,500 a year. But given that this is the third hike, the combined pinch will be around Rs. 600 per month, or Rs. 7,000 a year. Over four years, it adds up to Rs. 28,000-30,000 even for a mass mid-segment car.

Car financiers have undertaken at least one hike (in some cases two) this year. In April, all financiers went in for a 75-100 bps increase. Some followed it up with another hike in May-June.