Pvt banks hike margin money on car loans
Rajesh Chandramouli | TNN Chennai: Buying one's first car is an emotional milestone for many. And it isn't easy, given high interest rates. But what's making it even harder is the margin money, which a buyer must pay up front. Private-sector banks have quietly hiked the margin requirement by 10 percentage points in the past few weeks. "For the first-time buyer, owning a car is an emotional accomplishment, so he will try and stretch himself. But, where he gets stumped right now is on margin payments,'' an official with a private bank said. "Car financiers are hiking interest rates and increasing margin payments, and it's affecting the already damp sentiment. We expect to see a drop in domestic sales because of this situation,'' said Arvind Saxena, senior vice-president, marketing, Hyundai. Car dealers say it is becoming increasingly difficult to get a car loan through. For a compact car (B segment), lenders now demand 10% to 15% as margin money, up from about 5% earlier. For a midsized sedan (C-segment car), the margin money requirement has been raised from 10% to 20%, and for a utility vehicle it's up from 15% to 25%. Commercial banks lend up to 85% of the on-road price (that is, the dealer price plus road tax and insurance). "The problem here is that paperwork takes a week to 10 days,'' dealers said. What this means for a compact car buyer, in other words, is that he or she must shell out around Rs 60,000 up front, as against Rs 20,000 earlier. The up-front payment increases correspondingly for bigger cars. Until recently, lenders financed upto 100% of the onroad price of a car. "This is not all. In most cases, car financiers have brought in tighter disbursal norms, making a purchase a Herculean task. I know of a case in Coimbatore of a buyer who was asked to show property in his name, in order to get a loan for a small car! And after all that paperwork, the lender disbursed only 85% of the car's value," sources said. Some in the market feel that rising interest rates don't really hurt sales much. A 50-basis-point (that is, half of 1%) increase on a Rs 1 lakh car loan for three years would translate into a monthly increase by only Rs 36, they say. --~--~---------~--~----~------------~-------~--~----~ You received this message because you are subscribed to the Google Groups ""GLOBAL SPECULATORS"" group. To post to this group, send email to [email protected] To unsubscribe from this group, send email to [EMAIL PROTECTED] For more options, visit this group at http://groups.google.com/group/globalspeculators?hl=en -~----------~----~----~----~------~----~------~--~---
