subject: Drive Home The Best Car Loan Deal This Season [print this page] There is superior news for car manufacturers in India - car sales are on a rise! Sales figures show an impressive growth from the beginning of this year with 32 % rise in January, 33 % and 20 % increase in February and March respectively. As compared to the same period last year, sales figures for April have shown a positive growth for most car companies. The total car sales over all segments have increased by 39 % in April. Sales for Maruti Suzuki have increased by 23 % in April this year compared with April 2009. Hyundai and Toyota have also seen a steep increase in their sales with a 28.10 % and 77.7 % rise in their sales respectively. This increase can be attributed to many factors:
Introduction of new models. Novelty always attracts customer attention. This seems to be the mantra behind the geared up sales figure in this sector. For instance, Volkswagen launched its latest hatchback - New Polo and received tremendous response. It booked 7,300 cars in April.
Small cars driving growth. Sales have picked up significantly in the small car segment and are leading the sales charts. For instance, Ford
Motor Companys Figo sold 7,226 cars in April this year as compared with 1,833 in April last year.
Attractive deals
Banks and other financial institutions are offering attractive interest rates on car loans, both new as well as old, to encourage customers to take loans from them. This, in turn, is boosting sales of cars in the country. Most financial institutions offer interest rates within the range of 8 % and 13 % for a loan term of one year to five years on new cars. For example, ICICI Bank is offering a floating interest rate of 9.5 % to 13 %. State Bank of India, on the other hand, is offering a car loan at a floating interest rate of 11.25 % and fixed rate of 8 % on its EZEE car loan scheme. HDFC Bank offers a fixed interest rate of 10.5 %. Car loan interest rates on purchasing used cars are generally higher. For example, SBI charges 14.75 - 15.00 % rate of interest for used-car loans for a 1-5 years term.
Interest rate and loan eligibility
Interest rate offered by banks depends upon several factors like the term of loan, amount of loan, and type of interest rate - fixed or floating, whether it is a new car or an old one, credibility of the borrower, age and income of the borrower. Therefore, one has to negotiate to get the best deal. Also, it is advisable to look into the entire package deal when deciding upon the best offer.
Dealers offer customers attractive schemes such as free car accessories like music system and mats. One might get a cash discount as well. These factors should be considered while calculating the effective interest rate on the loan.
Repaying your car loan
Lenders require repayment of loan in the form of monthly installments (EMIs). The interest is computed using the compound method. For example, assuming you take a loan for Rs 2 lakh for five years at a fixed interest rate of 10 %, your EMI would be around Rs 4,250 per month. The repayment schedule will look like this:
Therefore, haggle a little and you might end up with a good deal.
