There is good 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 per cent rise in January, 33 per cent and 20 per cent 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 per cent in April. Sales for Maruti Suzuki have increased by 23 per cent in April this year compared with April 2009. Hyundai and Toyota have also seen a steep increase in their sales with a 28.10 per cent and 77.7 per cent rise in their sales respectively. This increase can be attributed to many factors:
Better economy. The Indian economy is returning on the growth trajectory of more than 8 per cent growth rate and, therefore, people are more optimistic as opposed to last year. This has encouraged customers to kick off big ticket purchases like cars.
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, Volkwagen 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 Company's 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 per cent and 13 per cent for a loan term of one year to five years on new cars. For example, ICICI Bank (ICICIBANK.NS : 809.35 -22.75
) is offering a floating interest rate of 9.5 per cent to 13 per cent. State Bank of India (SBIN.NS : 2155.1 -76.1), on the other hand, is offering a car loan at a floating interest rate of 11.25 per cent and fixed rate of 8 per cent on its EZEE car loan scheme. HDFC Bank offers a fixed interest rate of 10.5 per cent. Interest rates on loans for purchasing used cars are generally higher. For example, SBI charges 14.75 - 15.00 per cent 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, 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 per cent, 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.
Source:http://in.biz.yahoo.com/
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