Car Loan Interest Rate

(Car Loan Trends in 2015)

The advent of the year 2015 brought in good news to car loan borrowers and prospective car buyers with the Reserve Bank of India setting the tone for a reduction in interest rates levied by banks in India. Lowering repo rates twice from 8 to 7.5 percent, since January, banks would be expected to start implementing these cuts in the form of lowered interest rates. Further rate reductions are expected around April and car loan borrowers can expect some solid savings from these cuts. Banks in India have to ensure that these cuts benefit the borrowers and there is constant pressure building on lender banks to transmit these changes in a fair manner to customers. Basis point drops play a key role in reducing the car loan EMI and borrowers can also tweak their loan tenures with fixed EMI amounts. Experts infer that this drop in rates will also help improve sales in a currently sluggish automobile industry.

Car Loan Interest Rates in 2015

Different banks in India charge different interest rates depending on the a) quantum of the loan, b) loan tenure and c) income criteria of the applicant. Most car loans come with fixed rates of interest and variable tenures. Banks give preference to certain customers while deciding the rates and fees. A particular bank will give a low interest rate to a customer holding a salary account with their bank and also to employees working in top companies in India. An individual’s income also plays a key role in deciding the interest rate that the bank is going to charge him. Applicants with a considerable amount of income can easily get waivers and the lowest interest rates on their car loans.

Based on the current market scenario banks in India offer the following interest rates on car loans.

Public Sector Banks:

Name of Bank	Rate of Interest
State Bank of India	10.45% p.a. ( for men)  10.40% p.a. ( for women)
Bank of India	10.45% - 14%
State bank of Bikaner and Jaipur	10.40% - 10.55%
Bank of Baroda	10.50%
Canara Bank	10.70%
Allahabad Bank	10.75%
Punjab National Bank	10.50% - 11.75%
Central Bank of India	10.65% - 11.75%

Private Sector Banks:

Name of Bank	Rate of Interest
IDBI Bank	10.60%
HDFC Bank	10.75% - 12.50%
Kotak Mahindra	11.50% - 13.50%
Axis Bank	11.50%
ICICI Bank	10.75% - 15% (depending on the tenure)

Tips to get the best car loan interest rates

As a prospective buyer, an individual should decide on his loan amount and intended loan tenure before approaching a car dealer. Irrespective of the type of car, car buyers should give prominence to the rates and charges levied by a lender.

While negotiating with a car dealer, customer should not be attracted by the compelling discounts and offers any dealer would be offering along with the car loan. Any decision on the car loan and the associated interest rate should be taken separately to get the best deal possible. A first time buyer should always ask for car loan quotations from car dealerships with their charges like processing fees, prepayment fees and interest rates explicitly given.

As far as interest rates are concerned, the best lending option would be a bank or a financial institution and not a car dealer. Dealerships have a way with their attractive discounts, add-ons and free offers. But underneath they have a lot of extra charges hidden which a customer is not privy to. Banks are quite transparent about their charges and fees and do not push customers to take up extra add-ons and benefits until they actually require them. Also car loan interest rates charged by banks are pretty low when compared to dealerships and are fixed for the entire loan tenure.