Auto finance penetration increases as loans get cheaper

Chennai: Low five-year interest rates on auto loans pushed India further on the auto finance penetration map to 77% from 74% in 2016. The United States leads the way with penetration of more than 80%.
A combination of the downturn and the pandemic along with cheaper credit has helped increase financing penetration as more people prefer to keep cash on hand and have their vehicles financed.
In the past 18-24 months, funding penetration has increased by 2-3%. Passenger vehicle finance penetration in the United States has remained unchanged for almost 4 years – 86% in 2016 to 85.5% in the second quarter of 2020, according to data from Statista. “The penetration of auto finance has been at a high level over the past year and a half,” said Ravi Narayanan responsible for guaranteed assets, ICICI Bank. Ashish Modani, Vice President of ICRA, added: “Funding has seen a 2% to 3% increase in passenger vehicles over the past 2 years or so. Vehicle financiers say current interest rates, which are down at least 125 basis points (100 basis points = 1%) year over year, are the lowest in a long time , which made financing attractive. “In India, finance has always played a very important role in the automotive industry and finance penetration has always been around 75%. The penetration of finance varies from 2 to 3%. Interest rates are one of the important factors influencing Current interest rates are the lowest in at least five years, ”said Vyomesh Kapasi, MD, Kotak Mahindra Prime:.
Auto dealers claim that a combination of slowing down and cheaper financing for first-time buyers has actually boosted financing penetration. “India has a higher proportion of first-time buyers compared to other countries. And the organized used car market is still growing in India, prompting customers to switch to new cars. And long-term operating lease options are preferred in international markets, but in India customers prefer to own the vehicle, ”said Narayanan of ICICI:.
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