MUMBAI & NEW DELHI( PaisaWaisa) September 24, 2008: Car sales are distinctly on the golf stroke, but it is not forbidding the auto financiers from coming up with fresh innovative schemes to push up the sales. In fact, the lenders are also increasingly settling down to lower interest rates, floating rate loans and lowering the commissions of the dealers to enhance the rates of demand.
It is quite interesting to note that two biggest players in the arena of car financing have decided to cut down the interest rates by 2% in an endeavour to support consumer interest going. This has been done by lowering the commission that banks pay to the dealers of automobile, thus holding the rates at a level which can be easily afforded by the buyers.
Both Kotak Mahindra and HDFC Bank who are among the top three financiers of four wheelers, would decrease their rack rates by 2%. Most importantly, Kotak Mahindra Prime now charges just an interest rate of 16%, which would now be definitely brought down to 14%.
HDFC Bank is also not far away from the race. It would bring down its rates from 14.75-15.5% to 12.8-14.16%. These interest rates would surely depend on the tenure of loan, reported the bank officials. Financiers presently pass on a commission of about 5% to dealers. Dealers, on the other hand, pass a part of this commission to their valued customers. As such, the final rates which the customers have to bear would be 13.75-15%.
This year, the interest rates for car sales have impacted the sale track. This is just because their interest rates have gone up to 1.5-2%. In fact, in July, the sales of the four-wheelers lowered for the first time in direct terms. Moreover, the sales in growth has been witnessing downfall since April.
The prime CEO of Kotak Mahindra, Sumit Bali commented, This move would surely motivate the industry. Before, the payouts were just as high as 500 bps, but now it would be capped at 200. This payout reductions would be passed on to the esteemed customers. The new rates would be disclosed by us next week. This process would also help to make the portfolio secured. The EVP of HDFC Bank, Ashok Khanna further commented, Not all dealers were passing on commissions to their valued customers. In big cities, the dealers may pass on the commissions, but in small cities, the case was not similar. Traversing forward, it is believed the move would bring in more transparency, as the targeted customers would now be more aware of the rates.
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