NEW DELHI: Call it the price-gap
funding in the car market. Even while most big consumer finance marketers, as
well as any automaker will tell you that just about 17-18% of all cars are
bought on cash, almost a third, 31.4%, of the 10 million-odd car owners in India
say they bought theirs on hard cash.
The dichotomy in the two set of figures is explained by the typical behaviour of consumers here, for all those who paid most of their vehicle cost in cash report it as cash transaction even while they may have gone in for financing the remainder sum.
In this concluding part of a three-part series, ET presents an exclusive peek into consumer financing area of the Indian car market through the prism of the biggest ever car market survey done by NCAER for Maruti Udyog, covering around 4,50,000 households across 342 cities/towns and 1,976 villages across the country.
But first, in keeping with the unique nature of consumer price-gap funding model in the car market, a qualification here: Cash down means where the consumer paid majority in cash, for cash down and finance options, it seems are not mutually exclusive in this market!
Up front cash figures apart, share of structured bank and financial institution finance in new car purchase is on the rise, moving from a low under 40% pre-2000 to around 60% post 2004. Countrywide aggregates, however, as most marketers will tell you, conceal more than they reveal, for the real story is in huge variations in car financing options across different regions of the country.
Almost two in every five cars sold in north India, for instance, is still bought (predominantly) on cash, even though it has come down from a high of 84% just about six-seven years ago. In comparison, in supposedly conservative south India, three of every four new cars are bought on finance.
In one sense, these figures on car financing options reveal how much we have changed, and yet, stark consumption differences across geography remain the hallmark of the Indian consumer market. Across the regions, buying behaviour shows stark variations when its comes to cash-down purchase or finance options.
As high as 44.6% vehicles are bought on cash in the north, followed by bank finance (42.5%), with the proportions in the west are 42.5% and 48%, respectively. Analysts attribute the behaviour to two factors — high agriculture incomes in the north Indian states such as Punjab, Haryana and Uttaranchal and the region being the largest car market in the country.
For instance, Delhi alone sells 35% of all the cars sold in India. “Such high farm incomes doesn’t hold true for states in the south. Moreover, south Indians put their cash in more traditional assets such as gold instead of items like automobiles,” says Sachin Khandelwal, GM, ICICI Bank and an old auto finance hand.
East India, which is the smallest cars market accounting for 6-7% total sales, shows the lowest cash-down purchases, at just 13.8%, with formal and informal car finance accounting for the rest.
The dichotomy in the two set of figures is explained by the typical behaviour of consumers here, for all those who paid most of their vehicle cost in cash report it as cash transaction even while they may have gone in for financing the remainder sum.
In this concluding part of a three-part series, ET presents an exclusive peek into consumer financing area of the Indian car market through the prism of the biggest ever car market survey done by NCAER for Maruti Udyog, covering around 4,50,000 households across 342 cities/towns and 1,976 villages across the country.
But first, in keeping with the unique nature of consumer price-gap funding model in the car market, a qualification here: Cash down means where the consumer paid majority in cash, for cash down and finance options, it seems are not mutually exclusive in this market!
Up front cash figures apart, share of structured bank and financial institution finance in new car purchase is on the rise, moving from a low under 40% pre-2000 to around 60% post 2004. Countrywide aggregates, however, as most marketers will tell you, conceal more than they reveal, for the real story is in huge variations in car financing options across different regions of the country.
Almost two in every five cars sold in north India, for instance, is still bought (predominantly) on cash, even though it has come down from a high of 84% just about six-seven years ago. In comparison, in supposedly conservative south India, three of every four new cars are bought on finance.
In one sense, these figures on car financing options reveal how much we have changed, and yet, stark consumption differences across geography remain the hallmark of the Indian consumer market. Across the regions, buying behaviour shows stark variations when its comes to cash-down purchase or finance options.
As high as 44.6% vehicles are bought on cash in the north, followed by bank finance (42.5%), with the proportions in the west are 42.5% and 48%, respectively. Analysts attribute the behaviour to two factors — high agriculture incomes in the north Indian states such as Punjab, Haryana and Uttaranchal and the region being the largest car market in the country.
For instance, Delhi alone sells 35% of all the cars sold in India. “Such high farm incomes doesn’t hold true for states in the south. Moreover, south Indians put their cash in more traditional assets such as gold instead of items like automobiles,” says Sachin Khandelwal, GM, ICICI Bank and an old auto finance hand.
East India, which is the smallest cars market accounting for 6-7% total sales, shows the lowest cash-down purchases, at just 13.8%, with formal and informal car finance accounting for the rest.
