Photo credits: familymwr

In case of housing loans, banks have a provision for restructuring the loan e.g. terms of extending the tenure of the loan. For the same, the bank must perceive the reason of default to be genuine. The Reserve Bank of India (RBI) has issued guidelines on the same. For. e.g. the loan tenure can be increased by not more than 1 year in most cases. Foreclosure by selling the collaterals with the borrower’s co-operation is also advised as the next step.

Owning a house or a car is a dream come true for many because of the availability of loans. In the last few years with an increase in standard of living particularly in the metros, the once conservative and loan averse investor is now willing take on loan commitments to satisfy even leisure requirements.

Taking a loan has an impact on your cash flows by way of EMI payments. What happens to all your loan commitments, if you have lost your job or are entangled in a debt trap because of too many commitments?  Default becomes imminent. A default occurs when a customer repeatedly fails to make payments to the lender as per the schedule outlined by the lender at the time of giving the loan.

Does a default mean that you need to give up ownership of the asset for which the loan was taken?

When you find that you are in a situation where you will not be able to meet your loan obligations, running away from the lender is the last thing you should do. Banks/lending institutions understand that there could be genuine reasons for which the borrower is unable to make timely payments such as loss of job, or an accident that may have confined the borrower to the bed. This is especially true if you have always paid your EMIs on time, every time before events took an unfortunate turn.

You need to engage in a dialogue with the bank/financial institution. Based on how genuine your intent and case is, the bank may look for various feasible solutions that is mutually acceptable. The borrower will benefit because he will be able to retain his asset and the bank will also benefit because this agreement will prevent an addition to its NPA portfolio.

The various options that can be worked out include:

• Reschedule your debt: After having analyzed your financial position, if the bank feels that the quantum of EMI is what is troubling you, they may be willing to reschedule your debt by extending the loan tenure. That will bring down the monthly EMI commitment, though it will mean more interest outgo in the long term. However, you should consider the immediate relief it can bring to your current situation. When the tide turns and you are facing better times you can try negotiating with your bank and revert to your old or higher EMI or even prepay your loan, closing it early and saving excessive interest outgo if it makes sense post the pre-payment penalty.

• Deferring the payment: If your financial situation is such that there is likely to be a jump in cash flow going forward because of change in job or any other reason, you may seek temporary relief from the bank for a few months. The bank may permit the same but may charge penalty for not paying within the time frames agreed upon earlier.

• Restructuring the loan: In case of housing loans, banks have a provision for restructuring the loan e.g. terms of extending the tenure of the loan. For the same, the bank must perceive the reason of default to be genuine. The Reserve Bank of India (RBI) has issued guidelines on the same. For. e.g. the loan tenure can be increased by not more than 1 year in most cases. Foreclosure by selling the collaterals with the borrower’s co-operation is also advised as the next step.

• One time settlement: If you express your desire to pay back, and make known to the bank your current financial condition, banks may be willing to enter into a one time settlement on a case to case basis. This is a good way to get rid of your loan if you have some money as usually the settlement will be done at a lesser value i.e. the bank may waive off some amount/charges. If your financial situation is really bad, then you may need to file for bankruptcy to free yourself from the loan commitment.

• Conversion of loan in case of unsecured loans: Banks tend to be stricter as far as unsecured loans are concerned. The borrower could opt for converting the unsecured loan to a secured one by offering a security. That should bring down the rate of interest and thus the EMI burden.

Running away from the problem is not the solution. Not only will you undergo emotional stress, you will also end up losing your asset. What is important is that your intent to pay off the loan should be evident to the lender. It is in the banks interest too, to ensure that the loan doesn’t turn bad. So be wise and engage in a dialogue with the bank the moment you figure out that you will not be able to meet obligations and don’t wait till the last moment. That should help you tide over the temporary crisis you could find yourself in.

What happens if none of the above options work out?

If none of the above options work, the bank after giving you time for repayment will go in for repossession of the asset for the purpose of recovery of dues.

Movable asset (Car/Auto)

• Borrower will be given a notice of 7-15 days to pay the dues before the repossession of the Vehicle. In case of non payment within this notice period, the Bank will repossess the pledged vehicle..
• After repossession of the vehicle, a Pre-Sale Notice would be issued to the borrower giving him a time line of 7 days to make payment of the outstanding dues. The Pre Sale Notice would clearly mention the details of the concerned office and the corresponding contact person for payment and release of vehicle.
• In case the borrower makes the payment in accordance with the agreed terms of settlement, the vehicle will be released back to the borrower within 7 days from the realization of the payment.
• The vehicle will be sold by way of auction through dealers empaneled with the bank within 90 days from the date of repossession.

Immovable Asset (House/property/land)

A notice will be sent to the borrower u/s 13(2) of the SARFAESI Act. This can be done only after the loan is classified as NPA as per the guidelines set by RBI

• The customer will be allowed 60 days post issuance of the notice to regularize the account or come forward to settle the account. .
• If the borrower refuses to pay, then the authorized officer will ask for the physical possession of the mortgaged property by handing over the demand possession notice to the borrower
• The Bank shall proceed with the auction of the attached property post 30 days of taking possession of the property, in the event, that the customer does not come forward and settle the loan. The Bank shall send the customer a letter intimating him, of the venue of the sale indicating date and time of the same.
• The bank will consider handing over possession of property to the borrower any time after repossession and before concluding sale transaction of the property, provided the bank dues are cleared in full.

Any excess amount obtained after adjusting the dues on the loan will be refunded to the borrower.

Borrower’s rights

The SARFAESI act gives the customer the right to appeal against the action of repossession taken by the bank in the Debt Recovery Tribunal u/s 17 within 45 days from the date when the action was taken. If the DRT passes an order against the borrower, then an appeal can be filed before the Appellate Tribunal within 30 days of receiving it. If it is held in appeal that the possession of the asset taken by the secured creditor was wrongful, the Tribunal or the Appellate Tribunal may direct its return to the borrower, along with appropriate compensation and cost.

Loan default can have serious consequences. Not only could it result in seizure and auction of your assets, but your credit score too will take a beating. Even rescheduling debt tarnishes your credit history to an extent and will reflect in your credit score. Obtaining a loan in the future will become an issue which is a huge financial setback. Make sure you take a loan only if you’re sure of timely repayment. A good way to do this is to ascertain your personal net worth in terms of assets you own and the money you have at your disposal after taking stock of your existing debts and other financial commitments.

Technically, a car loan default happens when a customer repeatedly fails to make the agreed car loan payments to the lender/bank that lent the money for its purchase. But is there a prescribed number of payment failure mentioned? Yes. Usually, the car loan agreement that you signed with your lender/bank will have these terms clearly spelt out.

Probably the next big thing on your monthly budgets after the mortgage loan is the car loan. And you would not want to default on this for obvious reasons. One, it will destroy your credit history and two you might lose your car to the repo man! But when does a default actually happen? Does making a deferred or skipping the payment for a month or so constitute a default? Will your car be repossessed then?

When does a default happen?

Technically, a car loan default happens when a customer repeatedly fails to make the agreed car loan payments to the lender/bank that lent the money for its purchase. But is there a prescribed number of payment failure mentioned? Yes. Usually, the car loan agreement that you signed with your lender/bank will have these terms clearly spelt out. Everything about your car loan, your loan repayment obligations and when you are in default are usually explained here. The agreement may also provide the risks involved and the possible solutions in case of a default.

Though the term ‘default’ has no universal definition to it and differs from case to case, the general meaning of ‘default’ is if you are 30, 60 or 90 days late on not making one or more payments. Having said this it is vital to know what you should be doing when you wake up to the fact that you might have big difficulties in making your car loan payment for the month and avoid being tagged a customer at ‘default.’

The problem starts when you fear the inability for the car loan payment start to avoid the lender/bank. Never do this. Most lenders/banks will work with payment issues on a case to case basis. So the moment you see trouble in making your car loan payment, call up your lender/bank and be honest to explain the reason for the delay in payment. They might have heard the excuse a thousand times before but being straightforward could work in your favor and bring about a mutually beneficial adjusted term.

Apart from this, there are many other options available to you. Don’t give up on your car until you try all of these.

1. Try to talk to your lender/bank to extend your car loan duration. For instance, if you had originally taken a car loan for 36 months you could request it to be extended to 48 months. This will ensure your monthly commitment is reduced.

1. Ask your lender/bank if he would consider allowing you to make a deferred payment. It means you will be allowed to skip the current month’s payment and make it at a later date. Explain to him that having a month’s jump on the payment will give you the much needed flexibility.

1. See if you could convince your lender/bank to change the payment due date permanently.

1. Late charges are often levied on your late payments. If you feel that these accumulated late charges is actually straining you from making a timely payment, ask your lender/bank to waive these fees. If it would help you make a timely payment, the lender/bank might agree.

What if none of the above options works out?

As said if the payments are not made as said in your agreement it is deemed as default. The obvious fallout of this is the lender/bank might repossess your car. Depending on your loan agreement, the lender/bank will send you a written notice of default asking you to make the remaining balance on your car loan or face repossession. If the notice is not honored within the time mentioned in it, your car will be repossessed.

What do the banks do with such cars? How do they get their money back?

As said, a repossessed car is often sold at an auction to pay off your default loan amount. The auction details are well advertised and done in a commercially reasonable manner. Usually, the lender/bank informs you or the customer at default about the place and timing of the auction so that if you want to bid or just see how the auction goes you can do so.

Your troubles might not end when the repossessed car is sold off at an auction! There could be other serious fallouts of this default for you. Your credit record will take a beating and if it does you might not be in a position to avail any new loans for the next 7 years. This might force you to get into the bad credit market where the interest rates are ominously high!

Next, you might face a default judgment. A default is the difference between the value of the car at the time the lender/bank sells it and the actual outstanding loan balance that you owe on the car loan. For instance, if you owe Rs. 4, 00, 000 to the lender/bank at the time of repossessing but the car only sells for Rs. 3, 00, 000, you will have to pay the difference of Rs. 1, 00, 000 to the lender/bank. If not, the lender/bank could move the court to claim it.

On the flip side if the car is sold off at a higher price than the money owed by you to the lender/bank, you will be reimbursed with the surplus amount.

Can a regular car buyer with funds purchase a repossessed car at a discount price? How does this process work?

Certainly! Repossessed cars are often sold at a discount price for obvious reasons, mostly because it is technically not a new car and up for only a resale. As said, repossessed cars are sold at auction which is advertised. So if you are interested in buying repossessed cars then you can refer to these adverts or also call auction houses or local lenders/banks that repossess cars or local used car dealers. In some cases you can buy the repossessed cars online as some small lenders do it online.

All information including the preferred payment mode, the correct form to be filled etc are usually available in the adverts or the lenders/banks, auction houses or local used car dealers or at the place where the auction takes place.

It is advisable to examine the repossessed car before buying it. You can take the help of someone like a car expert for this. It is also better to look at the vehicle history report, if it is available. A thorough check of the car interiors for defects and if possible taking a test drive will go a long way in ensuring that you buy a car in good condition.

When you compare cars, check the mileage that they are offering, accessories and features offered, the insurance cost of the car, the maintenance cost of the car and the warranty offered with the car. If you are not picky about the color of the car, a color which is not that fast moving may come with some good discounts. Also, look at the different features that a car offers and choose the one which offers most of the features that you want and yet stays inside your budget.

Owning a new car… This is a dream that almost all of us have nurtured since childhood. With getting a car loan today becoming easier than ever before, this dream can come true for us. However, finances aside, buying a new car can quickly turn from a beautiful dream to a horrible nightmare if you are not careful. Let’s take a look at some tips for you to use when you plan to buy your car.

Freeze on a budget

Before you even go around looking at different cars to buy, you have to ensure that you have fixed on the amount you are ready to spend for a car. There only a few people who would be able to buy a car outright. Most of us on the other hand would need to go in for a car loam. In such a situation, it is important to decide how much you are ready to pay for the down payment, monthly installment and other expenses.

Also, try to see that you come up with a sizable amount of down payment from the total budget. For example, if your budget is Rs. 5, 00, 000, then try to see whether you can come with a down payment of at least one-third of this amount. This is help in terms of a lower finance requirement and also lesser amount of interest to be paid.

Evaluate your need

If you are a family of six and you can afford to buy only one car, going in for a BMW sports coupe is not going to serve your need. Instead, look at cars which fulfill your need and at the same time satisfy your desire. Your choice of the car should be based on the purpose of you buying the car – may it be family need or your personal love for cars.

Compare different brands

Once you have evaluated your need and know the class and kind of car you want to buy; look at different brands offering cars in your choice of class and kind. Ofcourse, you may have fixated on a particular brand, however looking at different brand helps. The reason this will help is because the difference in brands also affects the price and you may end up saving anything from Rs. 30,000 to Rs. 50, 000.

Compare car features

When you compare cars, check the mileage that they are offering, accessories and featiures offered, the insurance cost of the car, the maintenance cost of the car and the warranty offered with the car. If you are not picky about the color of the car, a color which is not that fast moving may come with some good discounts. Also, look at the different features that a car offers and choose the one which offers most of the features that you want and yet stays inside your budget.

Choose a good dealer

Once you have chosen the car to buy, scout around for a good dealer. You can visit the dealerships, ask around about their services, check their past history of service and more importantly, look at the discounts, offers or promotions that they have to offer. The choice of a dealer should also be based on their willingness to help you buy the car of your choice in the budget that you have decided.

Choose a good finance company

Your choice of a finance company will bear an impact on your budget. Compare different offers from different companies and see which one can offer you the least interest rates and EMIs. Also, look for hidden charges and take that into consideration too. Ensure that the company you choose is the one which helps you stay inside your budget.

Buying a car is not as hard as it sounds. What it requires is a little bit of patient searching around and a strong will to resist the temptation of overshooting your budget.

“Patience, my dear friend. The story of the man is the story of the brand. It was, as you pointed out, in the year 1929 that the Scuderia Ferrari, which literally means the Ferrari stable, was founded in Modena. Its main purpose was allowing owner drivers to race. Of course, under Ferrari, it could not stop at just that and went on to become the technical racing outpost of Alfa. In fact in 1933, it took over as the racing department of Alfa.”

The Prancing Horse & The Racing Red

Seventeen year old Rahul was busy at his computer surfing the net for details about the latest Ferrari release, the 458 Italia. His room was filled with automobile memorabilia, posters, models and the like with a Ferrari 250 GTO taking pride of place at the centre of the display. He talked to himself as he surfed

“Man, what a car. Seriously, this car is totally iced.”

“I agree with you.” Rahul’s head snapped up as he looked around his room for the source of the unidentified sound.

“Up here. On your shelf”. Rahul looked up and it was all he could do to stop his jaw from falling open to his toes. There was a tiny horse on his shelf and it seemed to be speaking to him! Rahul shook his head, rubbed his eyes, told himself that he was spending too much time surfing and not enough time sleeping, and then slowly opened his eyes. The horse was still there.

“Oh my God! You are a tiny horse and you are talking”

“I am not any horse. Allow me to introduce myself. I am Cavallino Rampante or Prancing Horse. You should know me. I have been Ferrari’s logo for the past, oh, so many years. As to me being a talking horse, yes it’s true. Now get over it. I am here because I consider you to be a true fan and therefore feel that you must know something about the history of this brand.”

Rahul could only gape.

“Now you can close your mouth, doesn’t suit you!.”

“You speak funny”

“If by that, you mean that my English has an accent, well then here is news for you, Hello, I am Italian and well, I am a horse, my vocal cords aren’t exactly meant for talking now, are they?”

“No, I guess not.”

“Now, if you have finished with the disbelief and the rude remarks, can we please move on to the subject at hand?”

“Yeah, sure, great, whatever.”

“Hmm, your enthusiasm is overwhelming. The reason I am here is because too few of your generation care about anything other than the latest car and its specifications. You youngsters, you know nothing and yet believe that you know everything. To truly understand a car, you have to know its history. So, I am here to tell you the story of Ferrari.”

“First of all, who is being rude now? Secondly, I know some stuff about Ferrari. I know that Ferrari began in the year 1929 and that it was started by Enzo Ferrari”

“Hmmm. I am not saying you are wrong. It’s just that I have been a bit more intimately associated with the brand and hence know details which you couldn’t possibly be expected to know.” The horse sounds apologetic, Rahul thought!

“I would say that the true beginning of Ferrari was in the year 1908, when a young boy of ten named Enzo Anselmo Ferrari was taken by his father to see a car race in Bologna. Young Enzo was completely enthralled and I have always felt that Scuderia Ferrari was born in his mind that day.”

“Hey, that’s cool. Knowing what you wanna do, even as a kid, that’s awesome. I mean I am 17 and I still don’t know what I want.”

“Funny. I have always felt that you know exactly what you want to do but that is a topic for another day. Moving on, did you know that Enzo tried to get a job with FIAT in 1918 and was turned down?”

“OMG. What, were they dumb? I mean like, seriously, how could they not know?”

The horse smiled before continuing, “In 1919, he managed to get a job as a test driver in a company in Milan. His racing saw mixed fortunes and in the year 1920, he finished second in a race called Targa Floria, driving an Alfa Romeo car. Thus began his 20 year association with Alfa that was to see him doing everything from test driving to dealing before being finally appointed Head of Alfa Corse, the racing division of Alfa.”

“Ok, right. Now tell me about Ferrari, the brand.”

“Patience, my dear friend. The story of the man is the story of the brand. It was, as you pointed out, in the year 1929 that the Scuderia Ferrari, which literally means the Ferrari stable, was founded in Modena. Its main purpose was allowing owner drivers to race. Of course, under Ferrari, it could not stop at just that and went on to become the technical racing outpost of Alfa. In fact in 1933, it took over as the racing department of Alfa.”

“The Scuderia was wound up at the end of 1937 and in the beginning of 1938, Enzo took up his new position as the head of the racing department at Alfa. However, that was not to last long as he left Alfa the following year.”

“But why? Seems like he had a good job.”

“Yes, seems that way. However speculation is that Ferrari found out about plans by Alfa to take over his beloved Scuderia. Perhaps, this was what motivated him to leave Alfa? One can only guess. But this much is fact; Enzo did leave Alfa in 1939 under the condition that he would not use the name Ferrari in association with races or racing cars for a period of four years. From this moment on, one could say it become an obsession with Enzo to defeat Alfa in one of his own cars. And it is really this year that saw the birth of the Ferrari that we see today and I think that is enough history for you today.”

“What? No! You are just getting to the best part!”

“Well yes, but its morning and I can hear your mom coming this way to wake you up. Don’t worry, I will see you tonight. Good day.”

As Rahul watched in fascinated silence, the horse went back to being an emblem in his 250 GTO. He couldn’t wait for it be night. ( Continued at The Story of Ferrari – Part 2 )

1987 marked a very special year for both Maruti as well as our nation with the export of a first lot of 500 cars to Hungary. One can almost feel the jubilation that the workers of MUL must have felt in gaining acceptance in Europe, the very Mecca of automotive engineering. 1992 was a year of major overhaul in MUL with Suzuki increasing its shares to 50 %.

There are some brands that reflect the story of a nation, its rises and falls, its successes and failures. Maruti is one such brand. If the blue wings symbolising this brand could talk, what a story it would tell! It would speak about a country’s first venture into the cutthroat field of automobile manufacturing, it would tell us about the blood and sweat that transformed this brand into the global phenomenon that it now is but most of all, it would tell us that India took its first steps into the modern world along with it.

The story of this brand begins in 1981 when Maruti Udyog Limited (MUL) was incorporated under the provisions of Indian Companies Act, 1956. The Govt of India selected Suzuki Motor Corporation (SMC) as their partner in this joint venture. There is an interesting story behind this unlikely choice. Almost all major brands had announced their interest in this venture that would give them an entry into the virgin Indian market and in the initial meetings; all the companies were represented by their CEO’s. However the latter details were handled by executives of the respective companies, with one exception. The then CEO of Suzuki, Mr   Osamu Suzuki ensured that he attended every single meeting personally. He later on went to say that this sign of dedication was probably what got them the contract!

In 1982 the agreement was signed between the Indian Govt and SMC and MUL was finally born. Within thirteen months of its inception, MUL launched the Maruti 800, a 796 cc hatchback model car. The legend goes that the then Prime minister of India, Indira Gandhi herself handed over the keys to the first customer, Mr Harpal Singh. Twenty five years later, he still uses the same car. Between the years 1973 to 1983, the Indian car market had seen a total sale of 35 000 vehicles. Maruti 800 was to completely revolutionise this market reaching a total production of 1 million vehicles within March 1994. Again in 1984, the Omni was launched and was an instant success. Convenient and spacious, it was exactly what the up and coming business class in India wanted. This was followed by the launch of the Gypsy the next year. India’s first off road vehicle, it is still the best to do the Himalayan rally, ‘Raid de Himalaya’.

1987 marked a very special year for both Maruti as well as our nation with the export of a first lot of 500 cars to Hungary. One can almost feel the jubilation that the workers of MUL must have felt in gaining acceptance in Europe, the very Mecca of automotive engineering. 1992 was a year of major overhaul in MUL with Suzuki increasing its shares to 50 %. The next major milestone in the story of this brand is the launch of Maruti Zen. The following years saw the launch of the Esteem, crossing of the two million mark as well as the launch of Maruti Service Master as a model workshop. Things continued pretty much in the same vein until the year 1999.

This was the year Hyundai and Daewoo arrived with their flagship brands Santro and Matiz and suddenly Maruti was under siege. Further trouble came in the form of Telco, India’s second largest automobile maker who challenged Maruti for non compliance with Euro2 emission norms. A besieged MUL reported a loss of 269 crores in 2000. But Maruti came back, with a vengeance. Suzuki responded aggressively to Telco’s allegations and out came the newer, zippier 800 fully compliant with all norms. This was followed by the launch of Maruti Alto as well as the Institute of Driving Training & Research (IDTR) in Delhi. 2001 saw a nice, tidy little profit of Rs 104.5 crores. To round things of nicely, three more branches were launched, Maruti True Value where customers could obtain genuine spare parts, Maruti Finance and Maruti Insurance. The cherry on top of the gorgeously iced cake that was 2000 was definitely the launch of Versa.

In 2002 the Indian govt divested the rest of its shares in MUL and SMC acquired a majority stake of 54.2%.The following year, the company was listed in the BSE and NSE, and saw the IPO issue being oversubscribed 11.2 times. The following years saw the launch of the redesigned versions of Zen and Esteem as well as the launch of Swift, WagonR and Estilo. 2007 was again a trademark year, with the launch of three new brands – Swift diesel, SX4 and Grand Vitara, start of a new plant in Haryana and the official transition of Maruti Udyog Limited to Maruti Suzuki India Limited.

2008 saw the premiere of the concept car A star as well as the launch of Dzire. This year saw the company featuring among the world’s 200 most reputed companies as well as coming fourth in the passenger car sector. It would also be the ninth year running when the brand received the JD Power customer satisfaction award. This year would also, (phew!!!!) mark the sale of 7.5 million units of Maruti cars. 2009 would prove to be no less important to Maruti with Swift becoming the fastest car to cross the 3 lakh limit as well as the launch of their 50^th driving school. 2008 – 2009 would also see the highest number of exports in the history of the brand. What more is there to be said?

So, what does the future hold??? The future holds nothing but wings for Maruti and it’s a sure bet that this brand will continue to soar. Makes a good equity investment tip too!

Fixing a budget will give you more clarity on which models to choose. It will also act as a locus which defines the perimeter of flexibility that you can afford in case your needs are not satisfied by a lower end model. A budget is the best way to shortlist a segment as most of the cars available in each category in India are priced neck to neck.

A guide to help you decide the right segment for choosing a new car. Learn the steps to be followed to make sure that you get value for money as well the pleasure of driving something that’s an extension of you.

A new car in the house is a great achievement for many of us even in today’s “India shining” generation. We all remember the days when there used to be one or a maximum of two cars in the whole colony or street. Today there are probably very few urban houses which have less than two cars. A car has become a necessity rather than a luxury. This article will hence delve on solving your needs by choosing the right car for your need.

Step 1: Defining the need: The Why?

- Why are you buying the car?
- Is it for commuting to and from office?
- As a car for the family to go out on weekends?
- For the purpose of regular business travel; upcountry sales etc?
- To get adrenaline boosts?
- For your college going child?
- A spare car for emergencies?
- All the above and also as a luxury statement?

Once you are able to answer this first question, choosing and buying your new car becomes a lot easier. This is the most important aspect in your “operation buy new car” so spend a lot of time on this, include the family members too in the process, as they will surely expect to use the car if given a choice, especially when its new! Make sure you list out all the possible roles you expect your car to play in the household, don’t forget to add “for sleeping when there’s a fight with the missus or vice versa”!!!

Step 2: Drawing the boundaries: The financials

This is the crucial step where money meets desires. Although there may be a case of what came first in between step 1 and step 2, you could swap them based on your liking. How much ever you are ready to spend for buying a new car, answer this question irrespective of whether you are buying a car in exchange for your old car, buying the car entirely on cash or going in for a car loan.

Fixing a budget will give you more clarity on which models to choose. It will also act as a locus which defines the perimeter of flexibility that you can afford in case your needs are not satisfied by a lower end model. A budget is the best way to shortlist a segment as most of the cars available in each category in India are priced neck to neck.

Step 3: The balancing act – Needs vs. Budget

Once step 1 and step 2 have been thoroughly done, comes the final act of balancing between your needs and your budget. Some higher end models could satisfy your needs, but they might not fit into your budget. Some models may fit into your budget but may not satisfy your needs.

Take a sheet of paper and write down your needs in one column and find out the cost of satisfying all needs. The cost of satisfying all needs is the cost of the car segment which suits it. Now, take off the most unimportant of that need and check if it has a major impact on the cost. Keep doing the same till all those needs which can be sacrificed are ticked off. Now check the budget. Has the exercise helped you zero in on a segment which matches your budget or is it still the same? In the former case you can take that segment as the one from which you can choose your car, in the latter case start planning for hiking your budget.

The basic idea is to sacrifice some needs if it gives a big saving in cost. Else to stretch yourself so that at least all needs are matched. The extra bucks will at least result in more peace of mind and satisfaction while driving. A car is expected to be with you for at least 3-5 years. If you are unhappy with even one aspect, driving becomes a pain.

The segments:

Till a few years ago the cars were segmented based on length/size into A, B, C, D segments, starting from small, going upto big. But, lately it has been seen that in the same segment you could have various options in terms of utility of the car, and sometimes even 10 different versions of the same car. This led to a classification based on pricing. Even this has led to lots of confusion as the number of cars in each price band is large. Thus the ideal segment would be a pool of cars which suit your budget and satisfy most of your needs.

A rule of thumb segmentation we could use is:

Small or Compact car (needs satisfied in small budget)
Price band: 2-3.5 Lakh
Indian models: M800, Alto, Indica, Spark, Santro, i10 (basic), A-star

Premium compact car (needs satisfied in larger budget)
Price band: 3.5 Lakh-6 Lakh
Indian models: Getz, Swift, Ritz, Estilo, Palio, i10, i20, Wagon R, Fabia, Fiat Punto

Super premium compact car:
Price band: Above 6 Lakhs
Indian models: Jazz

Entry level Saloon (Big car at entry level prices)
Price band: 4.5 Lakh-6 Lakh
Indian models: Fusion, Ikon, Accent, Logan, Swift Dzire, Indigo, Indigo marina

Mid segment Saloon (Big car at medium prices)
Price band: 6-10 Lakhs
Indian models: Linea, Fiesta, Optra, City, Verna, SX4, Cedia, Lancer, SR-V

Luxury Saloon (Big cars at big prices)
Price band: 11 Lakhs-25 lakhs
Indian Models: Accord, Civic, Sonata, Laura, Superb, Octavia, Corolla Altis, VW Jetta

Premium/Super Luxury (Real big price, Luxury. Period)
Price band: 30 lakhs-50 lakhs
Indian Models: Audi-A4, A6, Q5. | BMW-3 series, 5 series | Mercedes Benz-C-class, E-class
Porsche-Cayman, Passat | Volvo- S80

Sports utility vehicle (Big money, big thrill)
Price Band: 10-50 lakh
Indian models: BMW-X3, Endeavour, Captiva, CR-V, Tucson, Merc-M class, Nissan X-trail, Outlander, Pajero, Montero, Land Cruiser, XC90

Multi-utility vehicles (Big on work, ok on price)
Price band: 2-25 lakh
Indian models: Omni, Tavera, Bolero, Getaway, Xylo, Scorpio, Versa, Rhino, Safari, Sumo Victa, Sumo Grande, Xenon, Innova.

*** This article has not included cars in the above 50 lakh segment and there is no unique way to segment them.

Today banks are keen in identifying new business niches and more customised services to handle the stiff market competitions. On the other hand inflation is continuing to haunt the policy makers.

In this scenario, RBI is expected to continue putting pressures on banks to increase the interest rates further in the coming year, with the monetary policy review in the end of January 2011.The lending rates has already shown signs of gradual firming up as a response to the regulatory measures put forward by RBI in the second quarter review during the early days of November 2010.

Although the year 2010 started with a good and smooth outflow in the loan segment, the monetary reviews of RBI has mandated certain regulations, both directly and indirectly to control the flow of liquidity in the system. In this fiscal, the policy rates have been raised six times so far. The Repo Rate has seen an increase by 125 basis points while Cash Reserve Ratio (CRR) a 100 basis point’s hike till now. To tame the rising prices in the housing sector, the risk weight for residential housing loans of Rs.75 lakh and above has been increased to 125% and LTV celing to 80% with immediate effect. The only exception is for borrowers looking for loans below Rs.20L. They will need to pay only 10% as down payment as opposed to others who need to shell out 20%.

The year 2010 thus visualized turmoil in the interest rate scenario of the country. The major impacts of this year are the rising interest rates in both deposit and lending and the disappearing teaser loans in the home loan segment, especially in the final quarter. For instance, State Bank of India has raised deposit rates by 50 to 150 basis points. SBI will be reviewing its base rate and special home loan scheme where it charges a fixed rate of 8% in the first year and 9% in the second and third year.

RBI has also increased the provisioning norms for teaser home loans which will last till the borrower moves back to the regular interest rates when the teaser period ends.

Banks increase deposit rates to attract more depositors. At the same time, as banks have lesser funds left with them and are paying higher interest to RBI (with the increased repo rate), they also increase the lending rates. RBI has instructed the banks that a higher lending rate should automatically ignite the cost of deposits. But so far, the increase in the benchmark rates has not fully reflected to the deposit rates.

In the loan segment, HDFC, ICICI and SBI have increased their home loan rates by 1%. SBI is continuing with its special home loan scheme with increased interest rates linked to the base rate and so is the case with HDFC.

In the current financial year, however, there has been a significant pick up in credit flow to industry loans and personal loans. As education loans and personal loans are highly need based loans, the demand for them seems to have unaffected, in the changing market conditions. When rates are on the higher trend, some banks offer special discounts and festive offers to pull the market. Education loan is the most rapidly growing segment of retail lending, which grew at 31% this year, while home loans and personal loans are showing only 4-5% growth. Increase in rates appears to be a certainty and it is the extent of the hike that banks have to decide on.

With the hiking rates, your dream cars will become more expensive this year. Car loan lenders have jacked up interest rates on loans between 75 to 100 basis points, and even car manufacturers are planning to increase prices due to the heavy input costs.

On the home loan front, existing customers need to watch out for tweaks in their interest rates. While the base rate system might benefit the new loan applicant it may not be so for existing customers. Discuss with your bank about passing the benefits of the base rate system to you as well. RBI has been stressing on this as well.

The concept of cross selling is giving added benefit now, especially to personal loan and education loan customers as for banks cross selling enhances the customer’s loyalty and ensures further business prospective to the bank. The central government’s decision to not charge interest rates for education loans on families whose income is less than 4.5 lakhs per annum is also a boon. This will come into force soon.

The Credit rating agency of India Ltd (CRISIL) expects a sharper hike in deposit rates and a healthy pick up in credit demand in the coming financial year. The credit growth this year seems to be higher than the growth witnessed in the corresponding period of the previous year. But for the banking industry, it is lower than the expectations as they targeted an overall credit growth of 20 per cent in FY-2011.

As real estate prices are rising as well as the interest rates, home buyers seem to have got themselves into a postponing attitude. This is indicated by a decline in home loan growth with various lenders. But still, the loans have far outpaced deposits in terms of growth. While loans have increased 11% this year, deposits grew at only a 8%.

With most banks increasing lending rates, the borrower needs to gear up to rework the monthly budget as they will have to fork out more every month. A shift from one bank to another is not an option as all banks are following the trend.

Normally, banks only give 85%-90% of the total cost of the vehicle. The rest will need to be provided upfront as a down payment. Always opt for a higher down payment and look to save on total interest costs. When you book the car, you need to pay a booking amount, which can range anywhere between Rs. 3,000 to Rs. 10,000.

Whatever may be your family and financial background, there are a few dreams that you would always nurture – a successful professional career or business, own house and your own car. When it comes to buying a car, most of us would either opt to make an outright purchase from our savings or go for an auto loan, depending on the kind of budgets, we have allocated for this goal. Here is some information which will help you with the process of opting for a car loan. Remember, the decision of making any purchases or any financial obligation that you enter into should be made only after taking full stock of your current financial condition and future plans.

Finance Schemes

You will need to check with different banks and compare the finance schemes available with them. The finance schemes currently available in the market are margin money schemes, advance EMI schemes and deposit payment schemes.

You can also approach the dealer you are interested in buying the car from for financing of the car. Most of the dealers would recommend banks that you can choose to go with and your chances of getting a better bargain on interest rates and discounts are brighter if you go with this option. Also, the dealer will take care of tedious paperwork, which can yield some relief.

Eligibility

Eligibility for a car loan is satisfied if your age is above 21 and if you have an annual income of at least Rs. 1 L per annum. Of course, the amount of loan would also depend on your financial profile, price of the car, model variant etc.

Documents Required

Even though some documents may vary between salaried individuals and self employed professionals, the common documents asked for are:

• Application form with photograph
• Identity & Residence proof
• Latest salary slip
• Form 16
• Bank statements

Down Payment / Booking Amount

Normally, banks only give 85%-90% of the total cost of the vehicle. The rest will need to be provided upfront as a down payment. Always opt for a higher down payment and look to save on total interest costs.

The booking amount is the amount paid to the dealer to book the car you are interested in. This amount can range anywhere between Rs. 3,000 to Rs. 10,000. However, for the new Tata Nano the booking amount is the complete cost of the car. Tata’s partnership with various banks has however enabled attractive options of financing the booking amount, which start from a low of Rs 2,850.

Interest Rates

Interest rates vary from bank to bank and also according to the type of car that you are interested in. The rates range between 10% and 15.5% for new cars and between 11% and 18.5% for used cars.

Other Fees

Other than the interest fees, banks also charge processing and documentation charges. This usually needs to be paid up front. These charges vary from bank to bank. Processing fees range between Rs. 1500 and Rs. 5000. Documentation charges range between Rs. 250 and Rs. 500. Then, there are other charges such as late payment charges, duplicate statement charges etc. which range anywhere between Rs. 150 and Rs. 500. There are also prepayment charges which are levied in case you close the loan before the end of the tenure of the loan.

Repayment Period

Repayment of the loan mostly ranges between 1 year and 6 years for almost all banks. Repayment period depends on the loan amount and the person’s income.

These are the most common things you need to check with the bank that you are taking the loan from. Apart from this here are some tips to get the best deal possible for your loan:

• Make a larger down payment – Always try and make a higher down payment. This reduces the requirement for your loan and you have a smaller debt liability
• Go for popular models – Look for models which are popular because banks usually have special offers for the popular models which can prove to be fruitful to you
• Get a car loan that covers on-road price of the car - Always try and get the on-road price car loan because this would include the registration charges, insurance, road tax and other costs associated with the car purchase thus making it a comprehensive solution
• Compare interest rates and other fees – Compare bank interest rates and other fees to get the best deal

Photo credits : labsji

Some insurers offer certain add-ons like Personal Accident cover along with your policy. If you want to get the car repaired but don’t have money to pay for it, cashless claim settlement can definitely help you. Opting for third party legal liability will help you safeguard yourself against the legal liability in case of accident. Some companies let you claim No-claim Bonus benefit if you have just bought their policy for the first time, but have not filed a claim with your previous insurer.

Today cars have become an indispensable part of our lives. Whether you intend to buy a Maruti Suzuki, Honda City or Mercedes Benz, you must buy car insurance. However the insurance premium is not common for all types of cars. Hence you should know the premium amount before you decide to buy a car.

Factors affecting the calculation of premium: The insurance premium depends on the various factors that if selected properly can help you in reducing your premium amount.

Type of car: With the various types of cars available today in the market, it is not surprising that smaller cars having engines with lower power will attract lower premium than the bigger cars with more power engines. Hence Maruti 800 will carry lower insurance premium than Ford Ikon with higher insurance premium.

City of car registration: As per the Indian Motor Tariff, cities have been divided into two zones: Zone A consisting of Ahmedabad, Bangalore, Chennai, Hyderabad, Kolkata, Mumbai, New Delhi and Pune and Zone B that includes all other cities. There is a difference in the premium charged for the same car in both the zones. The premium is higher for cars registered in Zone A as compared to those registered in Zone B.

Age of the car: Older the car, higher the premium charged. This is because as the car ages, it needs frequent maintenance due to excessive wear and tear on its parts. In order to compensate for the claims that you will make on the insurer to bear this cost, you will end up paying higher premium.

IDV: Insured Declared Value (IDV) is the amount paid to you in case your car is stolen or suffers damages that cannot be repaired. It is computed according to the present price of the car in the showroom multiplied by rate of depreciate. It is fixed by Tariff Advisory Committee at the commencement of start of the policy term.

Period of cover (if policy is taken for less than a year).

Any other discounts/benefits like no-claim bonus

No-Claim Bonus: This is one of the most important discounts you will ever get on the car insurance. It is applicable if you have not filed a claim for 5 years. This will help you get a rebate on your next policy renewal.

Other benefits: Installation of anti-theft devices will ensure your insurer will offer you rebate in the insurance premium. Certain insurers also give rebate to the disabled provide they have altered the car for their use. Also if you are a member of certain registered automobile associations, some insurers give you additional discounts. However if your car is fitted with certain advanced accessories such as CNG/LPG kit that were originally not included with the car, will increase your premium.

Add-ons with car insurance policy: Some insurers offer certain add-ons like Personal Accident cover along with your policy. If you want to get the car repaired but don’t have money to pay for it, cashless claim settlement can definitely help you. Opting for third party legal liability will help you safeguard yourself against the legal liability in case of accident. Some companies let you claim No-claim Bonus benefit if you have just bought their policy for the first time, but have not filed a claim with your previous insurer.

Having the correct car insurance is important not only from the legal aspect but also from the security angle. It will help you protect against the claims made by the opposite party in case of accident. But it is very important to select the policy carefully, since with the removal of tariff structure, the companies are free to charge their own premiums. So shop around carefully to get the best deals.

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When you have quite a bigger amount of money to spare on buying a car or rather as they say, you have arrived in life; it’s time for a luxury sedan or at least a sedan. The price range could be 8-15 lakhs for this category. The cars are longer, more spacious and the price tag is higher on account of the luxuries included and for the designs of the car. The seating would mainly be suitable for 4 people comfortably. This is the second biggest category of cars available in the Indian market.

Planning to buy a new car? Confused as to what type suits you and which model to buy? This is a ready reckoner for models available in India.

In choosing the right car for yourself you need to answer two fundamental questions

1. What is the main need for your car
2. What is the budget you have to buy your new car?

Once the above two questions are answered reasonably, it easier to zero-in on the model that will satisfy your requirement.

What is the need for the car?

Some of the answers for the above question could range from; for basic transportation for one individual, as a family car for a family of four, for adventure activities like mountain driving etc, for a big family of 8-10 people, for commercial uses like a taxi, as a luxury statement, for using on weekends or leisure travel.

A very Indian concept is that the above mentioned uses might overlap as we are still to become a society where we have 3 cars in the house; each for a specific purpose.

The answer to the second question could be broad ranging. 1-2 Lakh, 2-3 lakh, 3-4 Lakh and so on. With the influx of numerous car manufacturers in the country and the huge number of models that they have launched, it has become possible even to have multiple choices in a price band of Rs 50,000/-. Say 4, 50,000/- to 5, 00,000/-

Let’s now take a closer look at the choices we have.

Basic usage: A car for a single user. Say an executive of a company driving on company work, a student going to college, a housewife using a car for household purchases and dropping children at school. This requires a compact car, with space of four people to sit comfortably and also one which is a no hassles car. The ideal car would be one of the entry level models as the car usage will not justify a big/expensive car.

The models available in India to satisfy this need in the sub – 4 lakh range are:

Maruti – M800, Alto, A-Star, Zen Estilo, Wagon R

Fiat – Palio, Punto

Chevrolet – Spark, U-VA

Hyundai- Getz, Santro, i-10

Tata – Indica, Nano

Similarly for the same need if the budget is between 4-6 lakhs then the models available in India are

Ford: Ikon, Fiesta (basic), Fusion

Maruti: Swift

Chevrolet: Aveo

Hyundai: i20, Accent, Verna

Mahindra Renault: Logan

Skoda: Fabia

Tata: Indigo

Honda: Jazz

Mitsubishi: Lancer

Big family car: Van or Pick up

If the number of members in the family is above 4 then it would be more apt to go in for a larger car or a Van. This will ensure that everyone can sit comfortably and there is also space for any luggage or shopping which can be kept in the car.

The options available in the Indian market for this category are:

Tata: Sumo, Safari

Toyota: Innova

Maruti: Versa

Mahindra & Mahindra: Xylo, Scorpio, Bolero

Chevrolet: Tavera

Style statement: When you have quite a bigger amount of money to spare on buying a car or rather as they say, you have arrived in life; it’s time for a luxury sedan or at least a sedan. The price range could be 8-15 lakhs for this category. The cars are longer, more spacious and the price tag is higher on account of the luxuries included and for the designs of the car. The seating would mainly be suitable for 4 people comfortably. This is the second biggest category of cars available in the Indian market.

The choices available in the Sedan category in India are:

Fiat: 500

Ford: Fiesta (higher end)

Chevrolet: Optra, SR-V

Honda: City, Civic

Mitsubishi: Cedia

Skoda: Laura, Octavia

Tata: Safari

Toyota: Corolla

Man among machines:

If the need is only a car that is a macho statement and the budget is not much of an issue, then the segment suited for you is the SUV segment. SUV stands for Sports Utility Vehicle and the cars are usually mean looking machines with a macho touch. The space for passengers is larger and can usually accommodate at least 7 people comfortably. The price tags range from 10 Lakh to 50 Lakhs on average.

The models available in India in the SUV segment are:

Volvo: XC90

Volkswagen: Toureg

Toyota: Land cruiser

Nissan: X-Trail

Mitsubishi: Pajero, Outlander, Montero

Mercedes: M-Class

Hyundai: Tucson

Honda: CR-V

Chevrolet: Captiva

Maruti: Grand vitara

Load bearer:

Some of us may need vehicles which are only for lugging loads from point A-B and not to be looked as a car. Ideally this is a vehicle with a lot of space for keep material and capacity to seat 2 persons at the max. The car might not be taken/driven to a function’s front entrance but might be suitable to carry material to the rear gate. Some models available in India in this category:

Maruti: Omni

Mahindra: Getaway, Bolero

Tata: Sumo, Xenon

ICML: Rhino

As seen from the above discussions, the Indian customer is spoilt for choices when choosing a car to satisfy his/her needs. There are many models in the above 30 lakh category which are vehicles which are purely brought for the luxury of style value than purpose of use. The reasons why people will buy these vehicles are for the fact that they have arrived in life many years ago and it’s time to splurge on luxuries. Keep an eye on this column to get an analysis of cars available in that segment too. Happy driving!

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Also read:

• Which car segment is right for me
• What kind of impact is Nano likely to create?
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