During the projected period, the Indian Car Loan Market is expected to expand at a brisk pace due to growing disposable income, decreasing fuel prices, and increasing vehicle ownership.
Besides, the shift from combustion engine cars to electric vehicles, product releases, discounts provided by the government for the purchasing of electric vehicles, and a high replacement rate for vehicles are fostering car purchases throughout India, which is also pushing the country's car loan industry.
Besides, India has become one of the largest automobile markets after China, Japan, the US, and Germany, with sales of 3.3 million passenger cars in 2018, due to the high GDP growth rate and increasing population in the region. As a result, major auto manufacturers are building up their manufacturing facilities and concentrating on the country's launch of new cars, consequently driving India's car loan industry.
The Indian Car Loan Market may be segmented based on form, type of vehicle, source, percentage of a sanctioned number, type of area, tenure, and location. The industry can be segmented into SUVs, hatchbacks, and sedans in terms of vehicle type. The sedan is the country's dominant model of car and the trend is expected to continue in the years ahead as well. This is due to the comfort of cycling, safety, and lower noise, relative to other counterparts in the same category, vibration.
The Government of India has lowered GST from 12 per cent to 5 per cent on the purchase of electric vehicles to facilitate the adoption of electric vehicles and the Government is also giving INR1.5 lac tax exemption on loans taken for the purchase of an electric vehicle, thus driving the demand for car loans in India. The demand for used cars has risen in recent years, depending on the model, and the trend is expected to continue in the coming years due to the high yield and low price of these cars.
Significant firms providing car loans in India are divided into banks, OEMs, or non-banking financial firms (NBFC). To draw more customers and borrowers, original equipment manufacturers (OEMs) come up with different credit providers and provide loans based on individual needs for the purchase of cars in the region. IDFC Bank Offers IDFC First Bank Car Loan.
Compared to NBFCs and OEMs, public and private sector banks are the dominant players in the industry attributable to a broad consumer base, better customer service, and favourable rates. The share of NBFC, however, has risen in the last few years and the development is also expected to continue over the next five years. This is because the NBFC has a large share of non-metro and regional clients.
Many office goers would like to skip public transit and continue to travel in their private cars as state governments steadily lift the lockout. Owing to budget limitations and since they can use the vehicle only before the danger of covid-19 looms high, many of these customers will choose second-hand vehicles. According to an OLX online classifieds platform survey, 54 per cent of individuals looking to purchase a car in the next three to six months will choose a pre-owned vehicle. More than 3,800 respondents covered the report, which the company conducted between April and July.
Yet it is difficult to finance a used vehicle purchase. Interest rates are higher (by 3-7 per cent) than what lenders pay on new vehicles, and various criteria are looked at by each lender. Car loan Interest rate is typically higher for used-car loans relative to new car loans. For a used vehicle, the risk is greater for lenders. The past of a pre-owned vehicle is difficult for them to determine,' said Abhinav Kaul, vice-president of strategic alliances, BankBazaar, an online financial marketplace. We are looking at possibilities for financing a used car and cheaper alternatives to a pre-owned car loan.
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