Drive a smooth bargain

Drive your own new car in style as great deals are flowing the car buyer's way. When Biraja Tripathi, 25, Product Manager at Kotak Mutual Fund, bought a new car this August, he landed a sweet deal-a brand new, dynasty red, Santro Xing xl for just a down payment of Rs 8,000. The dealer's discounts took care of his registration and stamp duty charges. And the bank was more than willing to offer him near 100 per cent funding. "Since it was the month-end, I got a very good deal," he says, eagerly awaiting his new car.

As the cars business has been a competitive market, buyers have an edge when negotiating a deal. Hitesh Panchal, 33, a Software Engineer at TCS, bagged a music system, speakers and keyless access along with his husky blue, Santro XO last year. His three-year loan at an EMI of Rs 8,333 was because of an increased down payment of Rs 1.5 lakh. "I needed to keep the total interest costs low so I took a lower tenure and made a higher down payment."

And this coming festive season, the car business is expected to increase as consumer interest rises. Says Ravi Narayanan, Head (Auto and Commercial Loans), icici Bank: "Auto loans have been growing well in the recent past. But this festive season, the industry will grow faster." As of now, the deals are in favour of the buyers, so they may not get any better, but dealer discounts could marginally increase.

There are plenty of banks in the fray, but ICICI Bank and HDFC Bank are the biggest in the fray. Among the PSUs, State Bank India is also a big player in the business. Apart from the banks, there are non-banking finance companies, but they usually finance niche segments or products of certain companies. That means there's plenty of choice available for you when you are choosing the loan. You would only want to check how long the financiers take to disburse the loan and how soon you will get the delivery of your car.

Gearing for a deal

Quick tips to negotiate a good bargain.
 
» Dealers and lenders provide cash incentives or freebies, which help reduce the cost of your loan. Negotiate hard with all of them for a good deal.
» The direct selling agents pass up their commissions in your favour, which ranges from 2-2.5 per cent of the loan amount.
» Dealers push cars depending on the model, colour, accessories, etc. If you are not looking for a particular model, you could look across models and colours for the best offer.
» Don't club your discounts with accessories. Negotiate for dealer discounts, accessories and DSA discounts separately, and bargain to maximise them.
» Cars that are not-so-fast-moving have a higher dealer discount.

Drive in

For you, as there are many players in the car loans business, there's an extra bit of effort needed on your part to scout for dealers and negotiate with them. Still there are plenty of deals available, depends on where you look. Do compare the car loan interest rates, and choose the lowest interest rate. Usually, the small cars that are ranging within a price tag of Rs 3.5-4 lakh have a lower interest rate. The cars over that price range usually are charged about 50-100 basis points more in interest costs. Check the monthly installments per lakh from the bank or financier before you negotiate for anything else. This facilitates an easier comparison of loans across different banks and financiers. The lower the EMI per lakh, the cheaper is the loan. Buyers, however, have to make a down payment towards the car, which is usually 15 per cent, but you can get even 100 per cent financing these days depending on your credit history. You can increase your down payment and reduce your EMI, resulting in reduced interest costs.

Most buyers opt for the middle range of around five years, which is usually the life of the car. Says Harsh Roongta, CEO, Apnaloan.com: "Five-year loan terms are popular with car buyers, as most cars have a shelf life of similar duration." Besides, it's only the smaller cars that are financed over a seven-year period. Among other things, when you are scouting around for a car, apart from the interest rates, look for the type of plan that the bank is offering, the processing fee and how the EMIs are calculated-it should be on a reducing balance basis, although that is the norm nowadays. After you have settled on the interest rates, negotiate separately for financier discounts that are usually passed on by them. Though it will form a small portion of the discounts, it nevertheless helps to bring down the overall cost of the car. Also, dealers offer cash discounts separately on different cars, depending on car models, colour, and inventory position. You can add these discounts to your loan amount and, in turn, reduce your EMI.

Bargain for other accessories such as car stereos, speakers, free registration and stamp duty separately. Some financiers may not offer you any freebies if you are opting for cash discounts upfront. Others could offer you both. Accessories could usually fall cheaper for the dealers, so your option could be to take all the cash discounts. Remember, bargain hard and very soon you could easily be zipping away in your new car.