Next, almost all private banks raised interest rates on automobile loans. HDFC, ICICI Bank and Kotak Mahindra increased the rates by 0.5-0.75 per cent.
A 0.5 per cent rate hike for 60 months would increase your equated monthly installment (EMI) by Rs 25 a month per Rs 1 lakh borrowed. Therefore, if you have borrowed Rs 6 lakh, your EMI would rise by Rs 150 per month.
Though this might not pinch many buyers, buying a car has definitely become slightly more expensive. So, how can the buyer squeeze the extra buck and increase the efficiency of his/her purchasing rupee?
Similar to a house, a car is a very emotional purchase for most and there is a lot of excitement when one buys his/her first car. In the rush to make this purchase, most buyers forget the cardinal rules of striking a good deal. In fact, most buyers do not even know the type of discounts available when purchasing a new car.
The discounts could look small initially, but can add up to a significant amount.
These discounts are of various types.
DEALER DISCOUNT
The biggest discount is provided by the manufacturer and the dealer. A dealer can offer a discount of Rs 10,000- 70,000, on most cars.
When purchasing a car towards the year-end, one can manage a discount of as high as Rs 70,000. Generally, in the beginning of the year the discounts are slightly low and often range between Rs 10,000- 25,000. Though there are several exceptions to it. A newly launched car or a model in demand, mostly has a waiting period. For example, Toyota's newly launched SUV Fortuner has no discount from the dealer. In fact, there have been instances where agents have asked for a premium to assure earlier delivery. The waiting period, in this case, can be 6-9 months. Remember, a dealer would probably give you a small discount, initially, and you would have to negotiate to get a better one.
DISCOUNT ON FINANCE
Most banks give a finance payout of 1-5 per cent to their dealers for selling auto loans. Dealers pass this discount on as a one-time discount of 1.5-2 per cent as upfront money or a reduction in EMI, in terms of a lower interest rate.
|
Change in Prices
|
|
Company
|
Price Hike (Rs)
|
|
Tata Motors
|
65,000 - 70,000
|
|
Maruti Suzuki
|
3,000 - 13,000
|
|
TVS Motors
|
350 - 1,200
|
|
General Motors
|
6,000 - 22,000
|
|
Hyundai Motors
|
6,500 - 25,000
|
|
Honda Siel
|
13,000 - 41,000
|
|
Hero Honda
|
500 - 1,500
|
Buyers can opt for an upfront discount and negotiate this. A fair discount, here, may be 2-4 per cent. Another way is to arrange for their own finance from a known source or their existing bank, which might give a preferential rate.
DISCOUNT ON CAR INSURANCE PREMIUM
This is, again, an area where you could save. Generally, insurance companies give dealers a tidy margin of 35-40 per cent on the car insurance premium. Here, we are not talking about commissions but a broad range in which car insurance can be priced.
Buyers can get a good deal on their premiums, possibly up to 25-30 per cent lower than what has been quoted. You would have seen advertisements of dealers giving insurance or registering the car for Re 1. These are nothing but discounts given to the buyers.
EXCHANGE BONUS
If one is driving a specific brand of car and exchanging it for a higher-end one with the same dealer, he/she can also get what is called an exchange bonus. This is typically in the range of 1-3 per cent of the car value. The dealer often gets a sizeable margin on the sale of the old car.
|
Change in EMI
|
|
Interest Rate
Hike (%)
|
Loan Tenure
(Months)
|
EMI Hike Per
Lakh (Rs/month)
|
|
0.50
|
60
|
25
|
|
0.75
|
60
|
38
|
|
0.50
|
36
|
23
|
|
0.75
|
36
|
36
|
Besides this, there are corporate discounts or bulk discounts given if two or more people are buying from the dealer at the same time. If these steps are followed, one will certainly save a decent percentage of money and the recent price, rate hikes are not likely to affect you.
The writer is director, My Financial Advisor
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