A surge in the number of cars purchased with formal financing, coupled with factors like longer tenor loans and an uptick in used vehicle financing, has led auto financing growth outpacing the auto industry volume growth, says a report.
The auto loan growth has been coming in at 18-20 percent for leading financiers, while the auto industry reported a 6-7 percent surge in volumes, domestic brokerage Kotak Securities said today.
The report attributed the surge primarily to an increase in loan penetration, wherein segment leader Maruti Suzuki has reported a larger proportion of financed car sales, taking the ratio of financed vehicle purchases to 80 percent now from 68 percent in FY12.
From a revenue growth perspective as well, it has been an 11 percent rise per year for the auto industry since FY14, which is still lower than the loan growth, it said. It said tenor changes also caused the asymmetric rise in loans as compared to the industry, as the standard three- year loan tenors earlier, now loans are being given for longer durations.
Also, earlier the financiers used to stay away from the used car market, but now this is attracting sizeable interest from them, it said, adding data for the same is not available. Some car borrowers have also started opting for top-up loans, which are somewhat like personal loans, but with the security of the already financed vehicle for the lender, the report said.
While it is classified as car loans, the top-up financing has emerged as a high-margin business avenue for the lenders, the report concluded.
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