This way, these deals are normally cheaper than the generic auto loan schemes offered by the banks. The availability and sweetness of these schemes depend on how badly a car manufacturer is looking to do sales. With a slow market like today, there are plenty of such deals even on fastmoving cars," says Banwari Lal Sharma AVP - Marketing, Car-Wale Automotive Exchange Private Limited.

However, don't go by the rates alone. The numbers could be highly deceptive when it comes to the car loan market. Car loan interest rates, unlike those on home loans, are not easy to compare. This is because banks just quote the rack rates, whereas the effective interest rate is much lower and it varies from dealer to dealer. That is why if you really want to evaluate a car loan offer that would work lighter on your pocket, you have to do the math yourself.

"The bank specifies the rack rate on which it would propose to lend. The dealer has the option of ploughing back his commission, thereby reducing the interest burden for the customer. The decision on the extent of commission to be ploughed back rests with the dealer. Manufacturers also provide subventions, from time to time, to ensure stock liquidation, and these may also be passed on to the customer to reduce his effective interest burden. However, the bank would continue to maintain its lending rate," says Ashok Khanna, senior executive vice-president & business head, vehicle loans, HDFC Bank.

Hence, it all boils down to the dealer-bank tie-up and how much benefit the car dealer passes on to the customer. Here, we help you navigate the process of identifying the best car loan deal.

EVALUATING THE OFFERS

With the hardening of interest rates and fuel prices touching the sky, discounts and subventions by manufacturers are the only way to make the car market survive the tough time. Most loan deals are genuine in nature, still buyers have to be careful. They need to understand the scheme very well and compare it with the other schemes from different finance companies.

"There have been instances of a non-standard loan product at 7% interest rate working out to be more expensive than a 12% interest rate standard loan because the non-standard product had a different compounding base and wasn't on a monthly reducing basis," says Sharma says.

A subsidy or discount offered by a manufacturer can be factor in while calculating the loan burden to make the deal look much better. For example, a Rs 3-lakh loan at an interest rate of 13% for five years will have an EMI of Rs 6,753. "Let's assume that the dealer gets a discount of Rs 20,000 to be offered to the customer.

He doesn't tell it to the customer but reduces it from the loan amount, making the EMI go down as low as Rs 6,303. Or he may also choose to tell the customer that the effective interest rate he is offering is 9.5%. A discount of 20,000 doesn't sound as lucrative as an interest rate of 9.5% in the current scenario," says Sharma.

SCOUTING FOR THE BEST RATE

Before scouting for the best rate, finalise the car model and the loan amount. If you plan to fix the model based on the ongoing loan offers, it will only add to the confusion. Once you finalise the car model and the loan amount, then calculate the EMI with the help of the EMI calculator available websites and portals of many banks.