Car loans will become a lot cheaper in the next few weeks, after the State Bank of India took the first step on August 2 in reducing interest rates on car loans. SBI has dropped interest rates on car loans to 10.75% per annum from 11.25% earlier.
This move comes after the Reserve Bank of India cut the Statutory Liquidity Ratio (SLR) on Monday by 1%, which frees up more cash for banks to lend out. This move to cut car loan rates comes at a time when the automobile industry is facing a slowdown, although July sales numbers have begun to look up slightly due to pent up demand.
What this slash in rates means is that you will now have to pay an EMI of Rs. 2,162 per lakh of loan that you take against an earlier EMI of Rs. 2,187 per lakh on a five-year loan tenure. Annually, this change will result in a miniscule saving of Rs. 300 per lakh of loan overall. So if you’ve taken a Rs. 5 lakh loan, you will save about Rs. 1,500 per year on it.
That may not seem like much, but what this move by State Bank of India will do is to urge other private banks to also slash loan rates while moving into the festive season, which will then hopefully attract a few more buyers.
For you the car buyer, this means you can now negotiate harder with your banker to give you a good rate of interest on your car loan. Corporate purchases already attract a lower rate of interest. HDFC Bank for instance offers 10.75% for a 3 year car loan. State Bank of India and HDFC Bank offer the lowest car loan rates that we’ve seen so far, with ICICI Bank being among the more expensive banks with interest rate in some cases going up to 17%.
Tell us if you know of any bank offering the best rates in town.