Car loan rate to drop due to higher interest rate

For the last few years, the number of car buyers had been increasing, and along with that, the interest rate too kept rising. The rise in interest rate has now come to a stage, where it has started impacting sales of new cars. Many potential car buyers are now either deferring their car purchase or funding their purchase from their own pocket.

It is reported that in 2006-07, more than one million new passenger cars were sold in India, 80% of which was financed by banks and other financial institutions. Now, it has come down to about 70%.. Between December 2006 and now, auto finance rates have gone up to 13.5% from around 9.5 to 10%. The average loan amount for a car is around Rs4 lakh. With the increase in interest by at least three percentage points, the monthly instalment for a car – financed for three year tenure - has gone up by approximately Rs600.

Hyundai Motors India, the maker of the popular Santro, Entra, Sonata, Verna and Getz, has seen the number of car sold on finance coming down from around 86 per cent to 74 per cent this year. Hyundai Motors India is the second largest makers of compact segment cars in India, selling 43, 972 vehicles in April-May 2007..