The number of car buyers in India opting to buy cars in cash has doubled in past one year. There are more buyers who are ready to wait for the car and make a cash purchase than opt for financing schemes. This has resulted in decrease in margins for the dealers. Dealers who earn approximately 2-6 percent as commission from banks and financing agencies on auto loans are witnessing a significant decline in such sales.
There are more customers now who are opting to make a cash down payment and drive away.
Car sales based on auto loans were about 90 percent four years ago but they have now come down to 62-65 percent. After the credit crisis, more people are refraining from building up debts and seeking cash options for buying consumer goods such as automobiles. Moreover, there has been significant rise in rural sales as well. This sector is largely based on cash-component and less dependent on financing schemes.
Only 22 percent of Hyundai customers paid in cash in January 2008 but the number of such customers grew to 46 percent by December. Customers from semi-urban cities are also making cash purchases which further add to dealer woes.
Of course, a note must be made that in some cases buyers may have arranged their own finance, in which case the dealer might see the purchase as a cash purchase.
