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HDFC Bank becomes preferred financier for Telco cars - Views on News from Equitymaster
 
 
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  • Feb 23, 2000

    HDFC Bank becomes preferred financier for Telco cars

    HDFC Bank and Telco are entering into a strategic alliance where by the former will be the preferred financier for the Tata range of cars.

    The auto finance market has become increasingly competitive over the past few months with a number of financiers cutting interest rates. The current rate of interest on car loans varies between 16% for the economy car segment, 15.5% for the-mid segment and 15% for the premium segment. Apart from cutting interest rates, financiers are trying to increase their market share by offering customised scheme to their customers.

    A classic example to be quoted is that of the ballooning scheme which is very popular in the over seas market. In this scheme, the equated monthly instalments (EMI) would automatically be increased every year, depending on the salary hike enjoyed by the loan seeker. Both the car manufacturers and financiers are of the view that the balloon scheme loan system will be apt for the Indian market and will help to raise volumes.

    A tie up between the manufacturer and financier is not a new phenomenon in the car finance industry, with many such tie ups having taken place in the past. For instance Sundram Finance is a preferred financier for Fiat and similarly Countrywide Finance acts as a preferred financier for Maruti.

    The preferred financiers get discounts from the manufacturer on the car price, which they pass on to the customer without adding pressure to their bottom line. Consequently the consumer gets a more competitive rate of car finance. The tie up helps all the parties involved, right from manufacturer to financier to customer. The manufacturers are able to push their products in the market, increasing their volumes. The financiers are able to offer finance at more competitive rates and the consumer in the bargain gets car finance at low rate.

     

     

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