The Hindu Business Line : Car makers, dealers push sales anticipating increase in rates

There is a fear that a revision in the cash reserve ratio again would lead to private banks and other financial institutions further increasing their lending rates.

Priyanka Vyas

New Delhi, July 23 Car makers and dealers are pushing sales anticipating that interest rates could march ahead after the Reserve Bank of India reviews its monetary policy on July 29.

There is a fear that if there is a revision again in the cash reserve ratio - the quantum of funds required to parked by banks with the Central Bank – it would lead to private banks and other financial institutions increasing their lending rates further.

At present, the interest rate is around 15 per cent which translates in to an equated monthly instalment of approximately Rs 2,350 per lakh for a five year period. By next month if the lending rates move upwards by another 50-100 basis point, at 16 per cent the EMI would go up to Rs 2,395 on a loan amount of Rs 1 lakh for the same tenure.

This means that if the customer is buying a car like Swift or i10, on a loan amount of Rs 3 lakh EMI could get pushed to Rs 7,185 now. But for a premium car like Honda Accord or Toyota, interest rates tend to be relatively lower. According to car dealers, some of the banks have already raised lending rates in the beginning of the month between 0.25-0.75 basis points.

“We are pushing sales by wrapping up the deals with our customers and also sounding our prospective customers that going forward there could be a further increase in interest rates,” said a city based Maruti Dealer. A similar concern was voiced by CEO of a Toyota Dealership here, Mr Ashok Sachdev who also said, “there could be a further increase in interest rates.”

Honda Siel Cars India also said that dealers were keeping their workforce on toes to clinch the sales agreement with their likely customer in the hope that it would benefit them as well as the buyers.

“Whenever there is a CRR hike, it is usually followed by an increase in interest rates by banks. So this time also, there is no reason why it should be different,” said Mr Jnaneswar Sen, Vice President, Sales and Marketing, Honda Siel Cars India.

However, banks or manufacturers are not offering any freebies to lure customers to pre-pone purchases.

“The market is dull. The consumer sentiment is weak. There is certainly pressure on the consumers wallet with the high inflation level. This is not the right time to give offers considering the overall industry scenario. But we are strengthening our internal channels to augment sales with our existing customers,” said Mr Sujjan Sinha, Senior Vice President, Retail Banking, Axis Bank.

More Stories on : Cars | Trends | Interest Rates

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