While interest rates on auto loans have rose to as high as 12.5%, they are still lower by up to 2% for petrol cars. Multinational companies such as Volkswagen and Honda Siel have been offering a special rate of 6.99% for their petrol cars.
VW Financial Services, Volkswagen's car financing arm, has been offering an interest rate of 6.99% for its Vento (petrol version) to preserve leadership in the mid-size segment.
The cost of ownership of a petrol car has gone up as there is no respite from the ever increasing fuel prices after decontrol. The companies' offer will give impetus to the demand of petrol cars.
The lower rates provided by the car finance companies associated with the manufacturers is despite the higher interest rates offered by the banks. Banks have not changed their rats for petrol car owners.
The lower rates provided by financing companies owned by carmakers will trigger a rate war in the longer term amid car sales slowing down to 7% in May from a record high of 30% in March.