Car loan interest rates have increased by anything between 50 basis points and 100 basis points (100 bps = 1%). Notably, the rates have touched the double-digit mark after a long gap.

According to the sources, all private lenders have hiked their lending rates. The increase differs for every model. For instance, rack rate on loans for a B segment (compact car) will now be 12% while a C segment (sedan) would be charged 11.5% for loans ranging from three to five years. Except for PSU banks, almost all lenders, including Kotak, ICICI and HDFC Bank, have resulted in a hike. HDFC Bank has raised rates for new cars to 11.25-12% from 10.5-11% effective August 20, other private lenders have followed suit.

Though few dealers are with the view that increase in rate might dampen car sales, manufacturers maintain that the current hike would be absorbed by the market. The growth momentum is strong and this hike may not impact sales. However, another hike might spook the sentiment and potentially dampen new car sales. Also with the festive season round the corner manufacturers are looking at robust sales.

The increase is also applicable to used car loans. According to the sources, the new rates for used car loans, depending on the age and model of the car will now be 16% (indicative), which is a 50 basis points increase.