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Old 22nd April 2010, 12:54   #1
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Default Financing package for the Harley's - What a sweet heart deal!

Just posting this in case people have missed it out.

Harley-Davidson starts bookings in India

The para that caught my attention is this one:

"The company has tied up with ICICI Bank as its preferred partner for financing its entire range of motorcycles in India, and under a memorandum of understanding signed between Harley-Davidson India and ICICI Bank, the latter will offer finance options of up to 85 per cent for Harley-Davidson customers at 11 per cent rate of interest for a period of up to five years. This would translate into an EMI of Rs 12,845 for a 2010 XL883 Low Sportster motorbike.

It has been an overwhelming response on Day 1 of the booking, as people have been waiting for years for these legendary bikes. People who have got themselves registered online will get an opportunity to test ride the bikes on invitation and can thereafter book the motorcycle with a minimum payment of Rs 50,000, Sanjay Tripathi, director (marketing), Harley-Davidson India said."


That the response would be overwhelming is a no-brainer in my view. There are plenty of people in India who can pay down Rs 50,000 and walk away with a Harley at a monthly installment plan of Rs 13,000.

However, I decided to crunch some numbers and had the following observations:

1) Rs 50,000 is just the booking amount

2) At 85% LTV, the booking amount for the entry level bike would be Rs 105,000 at the very least (ex-showroom price of Rs 700,000 x15%)

3) So, a loan amount of Rs 595,000 and 60 installments of Rs 12,845 yields an IRR of 11.6% for the bank, which given where the 2 wheeler financing market currently is, IS A GREAT DEAL!


Consider the HDFC financing package for the Hayabusa or other superbikes (This I got from HDFC's Western region head for 2 wheeler financing and as I run a company that takes CV loans of over Rs 20 crores from HDFC, I am sure he wasn't giving me a bum deal)


1) Max loan: Rs 900,000. Considering that the Hayabusa or similar bikes cost Rs 12,50,000 ex showroom, it translates to an LTV of 72%. The Harley package is for 85% LTV

2) If one takes the view that the V in the LTV formula is the on road price of the machine, then the advantage the Harley package has over the HDFC loan package increases as it not capped at an absolute Rupee no. (like the HDFC one is)

3) Rate of interest for HDFC: 8.5% flat, which as I was told translates to 14% reducing balance

4) Loan tenure: max 48 months, again giving advantage to the Harley package.

5) Using the above, one gets an EMI of Rs 24,600 for a loan on Rs lacs 900,000 and a down payment of Rs 350,000.


If one were to go and buy a Harley of similar price (ex-showroom price of Rs 12,50,000), the down payment would be lower at Rs 187,500 (85% LTV) and monthly installment would also be lower @ Rs 19,568 on account of lower interest rate and longer tenure.


The above comparative is looking at ex-showroom prices only (as OTR vary from state to state) and numbers may be off by Rs 500-600, here or there. Also, processing fees and other transaction costs have been ignored as banks vary them on a case to case basis.


In summary, my view is that the Harley financing package is really good. Although I am not a big fan of Harleys and am not in line to buy one, I do hope they have tremendous success. Maybe then, it will force Honda, Suzuki, Yamaha and Ducati to rethink their vehicle financing strategy and tie ups with banks to offer similar financing packages for their products.

That, ladies and gentlemen, will be great for all of us enthusiasts out here.
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Old 22nd April 2010, 13:18   #2
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Haha, as per the EMI provided on the HD India website, the interest rates for 36, 48 & 60 months are 5.9, 6 & 6.1 respectively. I hope they've almost doubled it. But one good thing (for ICICI & HD) is they raised their finances from 50% to 85%.
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Old 22nd April 2010, 13:42   #3
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Definetly makes you think about it as a feasible option. I mean like you put it 100K INR for booking and 13K INR EMI for 60 months looks inviting.
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Old 22nd April 2010, 14:26   #4
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Quote:
Originally Posted by aargee View Post
Haha, as per the EMI provided on the HD India website, the interest rates for 36, 48 & 60 months are 5.9, 6 & 6.1 respectively. I hope they've almost doubled it. But one good thing (for ICICI & HD) is they raised their finances from 50% to 85%.
5.9, 6 and 6.1 are perhaps the simple interest rates. ICICI's 11% would be a diminishing rate of interest.

The diminishing ROI is a little less than double of the simple interest rate and the ratio keeps changing as the tenure changes.

I dont know of how EXACTLY are these two related. May be someone can enlighten us here
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Old 22nd April 2010, 14:40   #5
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Quote:
Originally Posted by kcstheg View Post
5.9, 6 and 6.1 are perhaps the simple interest rates. ICICI's 11% would be a diminishing rate of interest.

The diminishing ROI is a little less than double of the simple interest rate and the ratio keeps changing as the tenure changes.

I dont know of how EXACTLY are these two related. May be someone can enlighten us here
Oh!!! Got you. Its not simple, its fixed & the latter could be dimnishing. You're right probably.
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Old 22nd April 2010, 14:56   #6
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Excellent thing this by Harley Davidson and for this reason alone they stand a better chance to succeed.
It also shows that they have studied the market carefully and then gone about launching their range (Almost entire) as compared to the Japs.

I hope the success of HD translates into the Japs getting to their senses and have better finance deals available for us mere salaried mortals.

Cheers
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Old 22nd April 2010, 16:13   #7
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Quote:
Originally Posted by kcstheg View Post
5.9, 6 and 6.1 are perhaps the simple interest rates. ICICI's 11% would be a diminishing rate of interest.

The diminishing ROI is a little less than double of the simple interest rate and the ratio keeps changing as the tenure changes.

I dont know of how EXACTLY are these two related. May be someone can enlighten us here

Diminishing rate of Interest or reducing balance is the interest you pay on the balance outstanding which comes down with each successive EMI.

The simple or fixed rate of interest is calculated on an outstanding amount which is fixed. Its just a marketing gimmick...as a borrower, we have to look at the interest rate we give on the outstanding amount...which as I mentioned before, comes down with each successive EMI.

Anyways, enough with Finance 101...lets hope the 3 jap companies and Ducati get their act together and emulate HD.

Getting a busa on these terms would be sweet....
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Old 24th April 2010, 18:53   #8
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I have the invite for the 883, I got a call from the HD customer care saying that I have been chosen for the test ride and in case I like it, I can make a token DP of 50k and take away the bike, rest would be dealt in EMIs. More details when I visit the dealership.
I wish I am HOGGED-up
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Old 24th April 2010, 20:26   #9
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Quote:
Originally Posted by AltoHoncho View Post
I have the invite for the 883, I got a call from the HD customer care saying that I have been chosen for the test ride and in case I like it, I can make a token DP of 50k and take away the bike, rest would be dealt in EMIs. More details when I visit the dealership.
I wish I am HOGGED-up
And if you book now & cancel it later, you lose 30K flat ; If you're taking the test ride from Bangy, then I hope you'll have your test ride by 22/23 May. Am I right?

Last edited by aargee : 24th April 2010 at 20:33.
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Old 24th April 2010, 20:57   #10
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yes Aargee... 22 May is the date. Once I get there I would detail out the financing and other things.
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