Banks to cut agent’s fee for cheaper auto loans

MONDAY, MAY 07, 2007 12:49:26 AM

NEW DELHI: If hardening interest rates have forced you to postpone your decision to buy a car, banks are all set to offer respite. Taking a hit on commissions of direct selling agents, ICICI and Kotak Mahindra have decided to reduce their interest rack rates (inclusive of DTA commissions) on car loans, reducing the effective interest rates from 15.5% to 13.5%.

While ICICI’s new car loan rates became effective on Friday, Kotak Mahindra’s car loan interest rates would be implemented from Monday. HDFC will follow suit and take a decision by Monday.

“The general market sentiment had become negative after hardening of interest rates and hence we took the decision to take a hit on our intermediary cost. This will provide the end consumer a reduced interest rate,” says ICICI Bank’s group head-car and commercial vehicle loans, NR Narayanan. The latest end-consumer interest rates can help save around Rs 2,000 every year on a car loan.

For a Santro/Zen Estilo segment car, on a loan of Rs 4 lakh for three years, the EMI now works out to be Rs 3,390 per Rs 1 lakh down from the previous Rs 3,430. Simply put, on the new rate of 14.25% the monthly instalment will be Rs 13,560 per month, almost Rs 160 cheaper. For a C segment car, on a Rs 5.5 lakh loan for three years, the consumer will now have to shell out Rs 18,645 compared with Rs 18,865 per month.

It might look like a small saving on the monthly instalment but is expected to provide a significant boost to car sales. Auto makers sales tally has been witnessing a slump after interest rates were hiked nearly five times since December 2006.

Source :
http://economictimes.indiatimes.com/Money_Matters/LoanCentre/Auto_Loans/
Banks_to_cut_agents_fee_for_cheaper_auto_loans/articleshow/2009225.cms