2020 Auto News News

Buy now, pay later scheme for auto loans may be available only to the cash rich, here’s why

Lenders say the current high-risk environment necessitates tighter the underwriting standards. Ramesh Iyer, Vice Chairman and Managing Director, Mahindra Finance, told The Financial Express that the scheme being offered by the lender is a way to help the customer by giving them a two-three-month moratorium.

The possibility of an increase in the usage of private vehicles has caught the fancy of automobile manufacturers and financiers alike. Yet, lenders want to be cautious about the kind of borrowers they acquire at a time when job losses and income destruction are the order of the day. Even as they lure potential car buyers with ‘buy-now-pay-later’ schemes, they are trying to make sure only those with their finances in order are able to get the benefit of these. So far, Maruti Suzuki India, Hyundai India and Mahindra & Mahindra have announced tie-ups with financiers such as HDFC Bank, ICICI Bank, Cholamandalam Finance and Mahindra Finance. Some other manufacturers — BMW India, Mercedes-Benz India and Tata Motors — are executing balloon EMI-like schemes through their group-owned financiers. The benefits on offer include zero down payment and three-month EMI waivers in some instances as also flexi, balloon and step-up EMI schemes, which allow borrowers to pay smaller instalments initially and larger ones later during the tenure of the loan.

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