Improved quality assurance about used cars, online platforms for used cars and shortening life cycles of passenger car ownership are the driving forces behind a fast rise in the used passenger car market in India. But easy access to finance is perhaps the catalyst that is making the purchase of used cars easier than before.
Major banks and NBFCs offer auto loans for used cars, which was not available even a few years ago. Let us see what are the interest rates and other conditions that they are charging from customers.
SBI, HDFC Bank
SBI, the largest bank in India, offers “Certified Pre-owned Car Loan Scheme” for which it charges interest rates from 11.70% to 15.20%. The credit rating will determine the applicable rate on a case-to-case basis. HDFC Bank charged interest that varied between 9.70% and 16.70% in the period between January and June 2024. The final rate and EMI will be determined by the credit score of the applicant.
Axis Bank, PNB
Axis Bank charges interest rates between 13.55% and 15.80%. There is also a processing fee that is Rs 6,000 or 1% of the loan amount, whichever is higher. For pre-owner cars, public sector bank PNB (Punjab National Bank) charges interest rates between 9.80% to 10.60%. If the credit score of the applicant is 750 and more, the rate 9.8%; if the score is between 700 and 749, 10.25% ill be charged. A rate of 10.6% will be charged if the score is between 650 and 699.
ICICI Bank, Federal Bank
ICICI Bank charges a minimum interest rate of 11.25% for loans on pre-owned cars. The tenure is between a year and 84 months. As in any other bank, the age of the vehicle and credit score of the individual are significant factors. Federal Bank charges a rate of 16.30% on loans given for the purchase of used cars. The formula that the bank follows is Repo Rate (currently 6.50%) + 9.80%.
The point to note is that the interest rate charged for loans to buy new vehicles is always less than the rate charged for old vehicles and that credit score becomes extremely significant for any loan that you might want to apply for.
The used car market in India is on an overdrive and is projected to reach $63.87 bn in 2029 from $31.62 bn in FY24, registering a CAGR of 15.10%. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
