The growth in loan disbursements for used cars is keeping pace with the boom in the used car market. In fact, the growth in loan disbursements for used cars is estimated to be double that of new car loans in the current fiscal, say financiers.
“We expect 40% growth in used car loans in Madhya Pradesh in the financial year 2014-15 as compared to 20% growth in the new car loans,” Magma Fincorp Limited vice-president Sanjiv Jha said. The Kolkata-based company is expanding its used car loan portfolio.
The organised used car market in the city is booming, thanks to affordable prices and availability of a wide range of vehicles at authorised dealers’ showrooms. Dealers say that the organised used car market in the city, which has evolved over the past few years, is growing at 20% year on year.
Some car manufacturers, including Maruti Suzuki and Mahindra, run used car showrooms in the city that not only sell used vehicles but also buy them and give the consumers the benefit of exchanging their old car for another one.
A wide variety of SUVs (sports utility vehicles), including Tata Safari, Mahindra Scorpio, Ford Endeavour, Honda CRV, and cars including Alto, i10, Tata Manza and Toyota Corolla are available at the used car showrooms in the city with price ranging from Rs 50,000 to Rs 15 lakh.
For those who want to finance the used vehicle, the dealers have tied up with private sector banks to provide on the spot finance to the eligible people. The formalities usually take about three to four days.
The only area where the buyer of a used car loses out is high interest charges on auto loan.
While the banks are willing to finance new cars at an interest rate of about 11%, the used cars attract an interest rate of about 16%, which translates into higher EMIs (equated monthly installments). Also, the tenure of the loan is curtailed in case the car is more than three years old.