According to news reports, car sales have remained on the fast lane this year. There has been a 9% growth in passenger vehicle sales in May 2017 alone. Automakers sold over 2.5 lakh units during the month.
Mahindra and Maruti Suzuki saw growth rates of over 15% each. The industry, as a whole, has sold about 1.1 million vehicles in the first 4 months of 2017. As of March 31st 2017, a record 3 million vehicles were sold. With an increasingly young population, the country will see more and more Indians becoming financially capable of owning a four wheeler.
No wonder the demand for Car Loans has also remained high. According to a report by Ernst & Young, the new passenger vehicle financing market in India will double by 2020. The estimated value of the market is Rs. 1,60,000 crore. The report also states that the Car Loan market in India is a growing market and finance penetration stands at 74%. These estimates are given based on the expectation that India’s vehicle penetration will increase by 50%.
Additional Reading: Car Loans – Interest Rates, Eligibility & More
What are the other factors that are driving the Car Loan market in India? Let’s find out.
A Smooth Ride
Here are the reasons why the Car Loan market is zooming ahead.
- The Indian economy has remained stable and the disposable income of the average Indian has gone up in the past decade. The average monthly disposable income in metros is pegged at Rs. 29,690 according to a survey by People Research on India’s Consumer Economy, which is a non-profit research centre.
- The introduction of new models year on year has helped rev up car sales in the country. Also, these models cater to untapped segments of the population, which has resulted in an overall reduced ownership period. This has directly helped the growth of the car industry and indirectly propelled the car financing market in the country.
- It is now easier to get a Car Loan than it was some time ago. This is mainly because of the wide spread network of financiers across the country. With non-banking financial companies giving banks a run for their money, borrowers have plenty of options to choose from.
- With the easy availability of a borrower’s credit history, lenders are now willing to finance up to 90% of the on-road price of a vehicle. Earlier, lenders were willing to finance only 90% of the ex-showroom price, which didn’t include registration and other charges. Essentially, the Loan-to-Value (LTV) ratio has gone up.
- There has been a significant change in the way Indian consumers look at owning a vehicle. Many understand that it is more convenient to own a car. With easier availability of Car Loans, more people are now willing to take loans to buy a car.
Additional Reading: Your Car Loan Interest Rate Guide
Several international car makers are finding it convenient to manufacture vehicles in India, given the demand for the same here. Why? As you might know, most of the developed nations in the west have reached a plateau in terms of car sales due to slowing economic growth.
Also, with disposable income remaining almost constant, customers abroad are unwilling to take on additional credit burdens. Due to this a total shift took place in the way foreign car manufacturing giants viewed the emerging nations as potential markets. They started regarding these nations as their future hubs for production and sales.
The demand for foreign brands is also pretty high here, especially in metros. So, these manufacturers, in a bid to increase sales, have their own finance companies offering loans for those who buy their cars. This is in addition to having tie-ups with other lenders.
Additional Reading: Car Loans for NRIs
Essentially, unlike the Home Loan or Personal Loan segment, the Car Loans market is huge with lenders that include banks, finance firms run by car manufacturers and other financial institutions. So, you have plenty of options. And with firms like BankBazaar, you can get your Car Loan approved in a flash with the paperless approval process.
So, the Car Loan market is all set to hit new records in the years to come. With increased competition amongst car manufacturers and financial institutions, you, the customer, can expect royal treatment.