Car Loan Sales Down

The Reserve Bank of India (RBI) has announced that they are expecting car loan rates to go up more than they are now. The bank has announced an increase in cash reserve ratio (CRR) by 50 basis points, and Repo rate by 25. This will take them to 6.5 and 7.75% respectively.

Because of interest increases over the past three years, borrowers have seen loans go up to 3% more than they were previously, and it is starting to hurt the car loan business. Car loans were at 9% just two years ago, and now they are running around 12%. Those figures are for new cars – used car loan rates are running another 3-5% per loan.

The car loan market has seen a major drop in auto loans, and they expect it to drop even more with rates going up again. People don’t want to take on a car loan at these rates, especially when they know that the car will continue to depreciate and they will still be paying on it. They have seen a major increase in people forgoing the car loan altogether and simply paying cash for their cars instead.

It used to be that 80% of car purchases were made with car loans, but now it has gone down to 75% just over the past three months, and experts predict that the number will continue to decrease. They say that unless something changes, they are going to start to see some real financial damage done to the car loan industry.

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