RBI rate cut, a sigh of relief to the car buyers

With the introduction of Union budget this year, each and every car maker in India increased the price of their models. With the increase in prices the common Indian buyer had to dig deeper in his pockets to buy  his dream four wheelers.  However, the hope can soar again now with the rate cut in loans that RBI has announced recently. Apart from receiving an openhanded welcome from the car companies, the rate cut news has also relieved the car buyers. Even though the rate cut will not have much an effect on the EMI’s , but is good for a start considering the surging price of the auto industry. As per Mr. Neeraj Garg, director Volkswagen Cars, the price cut move will motivate the Indian customers to spend more as near about 70% of car sales are done through financing.

Interest rate wheel was slowly and gradually turning on the upside as is currently on the 12.5-13% mark. After seeing a 30% growth in the financial year 2010-11, the car sales growth toppled to a mere 2%.  The blame for this slow growth lays with the surge in petrol prices and high interest rates. Giving an example of the extent to which EMIs can come down, a banker said that if the entire 50 basis point cut is passed on, then the EMI on a 3-year Rs 4 lakh car loan would come down by Rs 100. Ergonomically, if you have a 3 lakh loan for a period of 3 years the EMI rate will come down by Rs.100 if the entire 50 basis cut is passed on. Moreover, the lowering down of home loan rate will increase the disposable income of the Indian buyer, again a positive thing for the car industry.