Car financing
The
fall in interest rates and the margins between the trio has enabled the car buyer
to go for lower monthly repayments and the recently announced alliances by the
country's largest car manufacturer, with State Bank of India has also another
attempt at taking the vehicle financing to a masses. Such tie-ups helps to the
company's plans to more focus on the rural market.
Retail
financing booms
In
urban cities the number of passenger vehicles purchased through retail
financing which gives the clear indication of the increasing easier availability
and popular acceptance of this genre of car shopping.
Getting
a good deal
The car purchase starts obvious from the selection of the car model and variant.
After car selection next step is to calculate the amount of a car loan
based on your repayment. potential.
In
addition to the banks and the companies, now car manufacturers also have preferred
financing arrangements with some bank's and non-banking finance companies. They
may offer more competitive interest rate than the other as they have tie-ups.
Newer
options galore
The
loan taken is so rapidly over a fixed term at a pre-fixed interest rate, with
the total outstanding, including interest charge, which is payable in equated
monthly installments (EMIs).
Advance
EMIs:
Under
EMIs, the buyer can take a loan for a longer duration and at a lower interest
rate. However, the customer having the ability to pay a few EMIs in advance
will be applicable and beneficial.
This
will effectively reduce the tenure of the loan and provide the benefit of a lower
interest rate. Advance EMIs is better than using the excess cash to pay the upfront
margin money, as the size of the loan determines the competitiveness of the interest
rate offered.
Security
deposit model:
Security
deposit model is a variation, where the cash gets deposit with the financier,
instead of paying it to the dealer as margin money.
Balloon
payment:
Under
this model, the car buyer who is taking the loan gets to pay a lower EMI.
Its has not caught on among most of the banks because of the inherent unpredictability
of the used car market. As the used car market is becoming more organised with
the entry of manufacturers themselves, there is a likelihood of the balloon payment
becoming more popular.
Lease
and refinancing:
Under
this the car buyer has to pay the financier an EMI that consists of a monthly
lease rent, finance charges and other charges, if any. Refinancing is not so popular
in the car finance market. It is unlikely to be introduced in the near future.
Banks are more likely to come up with a refinancing option for the large end-of-term
payment.
SuperSavings
tie-up:
New
financing model which is being tried by a few multinational banks and other private
sector banks is to tie a current account. Super saving tie-up enables the car
buyer to excess funds from current account to the loan account, which helps
to reduce the outstanding with the financiers.
