Subvention – a common trend in the Indian financial sector in order to boost the overall business. The concept of providing financial incentives is quite common especially in the car loan segment, although it has been introduced recently in the housing sector.
However the extent of providing these incentives is not standardised. The process is as follows :
Only rack rates, the rate at which the bank lends, is quoted by the bank. But the actual interest might be very much lower. The bank specifies the rate at which the propose to lend and by considering the option of refusing the commission, the car dealers can reduce the interest burden on customers. Th decision regarding the extent of reducing the commission entirely depends upon the dealer.
All though, manufacturers introduce these incentives form time to time to promote quick stock clearance, the problem that rests here is, the amount of auto loan to opt for, depends upon these financial incentives or subventions that vary from dealer to dealer, making it a difficult task for the borrower to choose the best loan option.
The best way you can analyze how you can benefit from your car loan apart from getting your car, is by executing the following steps :
1. Fix the car you want to opt for
2. Decide the loan amount
3. Decide how much you will be paying as down payment. For example for a car of Rs5 Lakhs, if you are paying a downpayment of Rs1 Lakh, you can ask for a cash discount on that Rs.1 Lakh.