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Car loan rates may rise

Auto financiers like ICICI, Kotak Mahindra and HDFC are planning to hike interest rates by 50 basis points. For the car buyer that would mean an increase in the instal-ment amount by anything from Rs 3000-30,000 depending upon the model. Sources say most of the hikes will become effective from the new year. Typically a 5-year car loan works out to around Rs 2,000/lakh per month. And a 50 bp increase will hike this amount by Rs 25. That may seem small but it adds up in the end. For a hatchback car like the Santro/Zen Estilo or WagonR, whose financed amount works out to around Rs 3 lakh, this would mean a Rs 75 increase per instalment. In a year, the hike would amount to around Rs 900-1,000. In five years, the extra payout would be to the tune of Rs 3,000-5,000.

For a luxury car like the C-Class Mercedes Benz at the other end of the spectrum, a 50 bp increase will mean a hike of around Rs 350-500 per month and Rs 6,000 a year. In five years, the increase works out to around Rs 22,000-30,000. Currently, the rack rate is 10-10.5% on entry level cars like the M800 and Omni, 10-10.25% on compact cars like the Santro, WagonR and Indica, 10% on mid-size sedans like the Accent, Ikon, Fiesta or Indigo and 9.75-10.25% on premium cars going up to the Mercedes Benz range and the imported Porsches, Bentleys, Audis, etc. The hike will also hit two-wheeler loans where the rate is steeper at 18%. Ditto for commercial vehicles where rack rates rule at around 10.5% for heavy trucks and buses and 11.25% for lighter vehicles.

Posted in auto loan, loan, loan calculator, auto loan calculator, loan rate, car loan calculator, new car loan | Comments(1) June 2007