The Hindu Business Line : Premium car makers woo customers with smart finance options

New Delhi, July 30 Premium car buyers who may be having a second thought about making their purchase mainly due to interest rates climbing may be in for a surprise as there are attractive financing options that could lower their borrowing cost by 3-4 per cent.

Contrary to the huge discounts advertised by mass marketed car producers such as Maruti Suzuki and Hyundai, premium car makers are offering benefits to customers in the indirect way of clubbing the manufacturer’s cash discount with the financing option to reduce the equated monthly instalments (EMI).

This is mainly to keep intact the premium image commanded by the brand.

At an interest rate of 14.25 per cent for a five-year period on premium car loans, financiers offer concessions in the range of 4-5 per cent to the dealers who in turn pass it to the customers. Over and above this, the dealer provides an additional amount which he gets from the companies into the financing option, thus effectively trimming the equated monthly instalment further.

EMI could thus slide down to as low as 9.5-10 per cent on select models.

Fund support

“There is a subvention offered by the banks which lowers the rate of interest,” admits Mr Ashok Sachdev who owns Toyota, Ford and Hyundai dealerships in the city.

For instance, Toyota is offering around 8.5 per cent interest rate on Innova including discount from both the company’s end as well as on the part of financiers. In case of BMW cars, the interest rate, including the 4.5 per cent discount offered by banks to customers, could pull it down to 12.06 per cent from the current rate of 14.25 per cent.

“There has been an increase in the offers for premium car buyers for the past four to six weeks.

“To some extent, this is being driven by the 15-20 per cent drop in retail sales of premium cars in the current month,” said Mr Rajan Pental, Senior Vice-President, Auto Loans, HDFC Bank. Some companies such as Toyota and Honda have been witnessing a dip in sales over the last couple of months.

Sales dip

Dealers and bankers cite numerous reasons as to why they have stepped up offers for selling premium cars, including increasing their revenues with higher sales. In case of Toyota, it is offering such schemes mainly because it wants to phase-out the current Corolla model with a newer version, scheduled to be introduced during the year. “Another reason for the attractive offers is to push the inventory pile up,” explained Mr Sujjan Sinha, Senior Vice-President, Retail Banking at Axis Bank.

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