'Pay in cash' is the new mantra for an increasing number of car, two-wheeler and commercial vehicle buyers.
ICICI Bank and HDFC Bank, the two leading private sector banks in the country, said cash sales for cars and commercial vehicles have doubled to 30 per cent of the total sales compared to a year ago. In the case of two-wheeler buyers, more than 30 per cent are paying in cash.
Automobile loans are offered at a fixed interest rate and the lending rates have shot up by over 300 basis points in two years. Ravi Narayanan, general manager, ICICI Bank and Rajan Pendal, senior vice president (auto loans), HDFC Bank, confirmed that the number of car and commercial vehicle sales by cash has doubled.
The borrowers are also opting for an increase in the tenure of their loans from 4 years to 5 years to beat the impact of inflation. Narayanan said that before the interest rates became scorching, 60 per cent of car loan borrowers would opt for a tenure of three years, 10 per cent for two years and the remaining would go in for a 4- 5 year tenure.
The last category of borrowers have increased to 40 per cent now from 30 per cent earlier. The reason for this could be that people want to buy a higher category of cars, and also, keep the EMI within affordable limits.
HDFC Bank has reduced the dealer commissions on cars from 5 per cent to 2-3 per cent, to pass on the benefit to customers. ICICI Bank is set to introduce a floating rate for auto loans next week.
