In the early
90's buying a new car with a 'Bank Loan' was like starting an old
jalopy on a cold winter morning -laboriously long and mostly
frustrating. Loan sanctions would take upto 2 months & infinite
paperwork.
 Foreign Banks & Non Banking
Finance Companies(NBFCs) exploited the opportunity that the
car finance market offered and rapidly changed the industries' gears,
to cruise at top speed.
Fast loan sanctions, fast deliveries and very fast growth rates
became lane rules for the industry by mid 90's. Obviously delinquencies
(bad loans) also grew proportionately.
The RBI recently added some speed-breakers to this fast lane, and
the economic slowdown has taken off some air from the industry's
wheels. Today with no long waiting periods and a truly buyers market,
the Industry is wooing customers with transparent transactions,
lower interest rates and better services
Car Finance Market Today.
Market:
Economic slowdown & falling car sales have put the brakes on
the industry. With the splurge of new car models, the industry is
looking forward to better times.
Bad Loans:
The delinquency rates (Bad loans) have peaked to 7% (& more)
with most Finance companies.
Asset Safety:
Although cars are safer assets than other industrial / commercial
assets, the resale value of cars, particularly premium cars is low
today.
Lower spreads / Profits: With very little corporate
lending, most Finance companies and even Banks are looking at Car
finance for deploying funds leading to an interest rate war.
Competition: All players have tighter credit norms,
thus all are competing for the same customer - 'The Safe One'
Tie-ups: Alliances between Financiers and Car Manufacturers
seem to be the game today - to leverage a better deal with the manufacturer
and offer competitive rates to the customer. This also increases
the financiers reach, with presence at Car dealerpoints.
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