Private sector banks have jumped on to the bandwagon to offer better rates than Maruti Udyog for its best-selling car, Maruti 800.
Maruti, through State Bank of India, is offering the Maruti 800 at an equated monthly installment of Rs 2,599 for a loan period of seven years.
ICICI Bank is offering a 90-month loan at an EMI of Rs 2,499. "This (Maruti 800) is the entry level car which is the bread and butter for the auto finance industry. We are taking advantage of Maruti's advertisement to promote the offer," said ICICI Bank joint general manager and head of car loans Sachin Khandelwal.
"We also have an additional product for Maruti 800 where the EMI is Rs 1,999 for a seven-year loan. The loan amount is Rs 157,000," he added.
HDFC Bank has gone a step further. It has maintained the loan period at seven years, but has reduced the EMI to Rs 2,575.
"Our effective interest rate on the loan works out 25 basis points cheaper than that of Maruti's," said HDFC Bank vice president and head of retail assets S Ramakrishna. The bank is offering three different loan options on the Maruti 800.
In addition to the Rs 159,000, seven-year loan product offered at an EMI of Rs 2,575, the bank is financing 85 per cent of the on-road Maruti 800 price at an interest rate of 8.75 per cent.
Further, HDFC Bank customers can opt for an express loan product whereby they can get a loan across the counter for twice the amount of fixed deposit lying with the bank.
Foreign banks like Standard Chartered Bank and Citibank, which are significant players in the auto financing industry, have, however, opted to stay away.
"Spreads in financing new cars are at their all-time lows. With thin margins and depreciating car values, the proposition to elongate the auto loans is not attractive," said a senior vice president at a leading foreign bank.
The Maruti 800 has enjoyed an unbroken stint at the top since its launch in December 1983, with average monthly sales in the range of 10,000 units.
In March 2003, it clocked all-time high sales of 20,687 units. For the first time last month (May 2004), the hottest selling wheels in the country took a slight beating when Maruti Alto sold 10,373 units against Maruti 800's monthly figure of 10,016 units.
