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While leading banks have raised their benchmark lending rates last week,in turn, making home and auto loans costlier, car dealers in the city expect the upward spike in interest rates to have some impact on car sales (in the range of 3-5 per cent) but don't see buyers cancelling their plans ahead of the festive season. Some dealers also claim that more and more customers are choosing to increase their down-payment component in order to offset the rising interest costs.
Leading banks including HDFC and ICICI have raised their benchmark lending rates by 0.25 per cent last week. The move which made home and auto loans dearer is definitely going to have an impact on consumer sentiments, say dealers. "However, ahead of the festive season we do not see many customers opting to cancel their buying plans," claimed S Shah, a city-based dealer of Hyundai cars.
At the same time, Shah also admitted that car sales have not picked up from the slow trajectory that has impacted the industry growth in the last eight-nine months. "Our Janmashtami deliveries are around 20 per cent down this time compared to last year. It is not even a 100 cars this year," he said.
Another city based dealer Ajit Mehta who owns a Toyota dealership said buyers are increasingly choosing to raise their down-payment component. "Earlier the down-payment part used to be around 25 to 30 per cent of the cost of the car, now it has risen to around 45-50 per cent. Also more and more people are choosing to lower their loan component so that the high interest rates do not hurt and to ensure that the equated monthly installments (EMIs) are within reasonable limits," he explained.
In tough market conditions, where leading carmakers like Maruti Suzuki and Mahindra and Mahindra too have seen sales slipping, the festive months are what every carmaker is looking at to arrest the falling sales. Sandeep Kumar, chief executive officer of Manan Autolink, one of the leading Maruti dealers in the city said, "The rise in interest rates would have somewhat impact on demand, may be in the range of 3-5 per cent. However, the festive season would definitely boost sentiments." He added that at the moment the average rate of interest offered in the market for car loans is in the range of 11.25 per cent.
It can be noted here that last year, the festive season sales in the city remained flat, not showing much growth. High interest rates coupled with spiralling fuel prices had taken the sheen off festive sales in the city. On an average, around 7,500-8,500 cars are selling every month in Ahmedabad at the moment, informed Jainee P Gordhandas, promoter of BigGaddi.com. However, she also added, "Earlier for every new car sold, two used cars would sell in the market. This has however tapered down now.
"Several used car dealers in the city have taken a hit in their margins to liquidate their inventory. "While some are offering discounts, others have worked out schemes with financiers to offer lower rate of interest to lure customers," Gordhandas informed.
