Team-BHP - Toyota Access Finance Scheme.: Doable in India?

I was sent this video about Toyota's new finance scheme called "Toyota Access" which, I feel is very interesting and bring down the cost of purchase and ownership of a car manifold and encourage 2 wheeler buyers to buy cars and car buyers to buy cars from a higher segment than they can presently afford.

Take a look:
http://www.youtube.com/watch?v=FBTrU...eature=g-all-u

I was wondering if such a scheme is possible to in India, and the pros and cons of it thereof. My views:

1. It will certainly help increase car sales significantly.
2. It will promote the sale of safer and more expensive cars.
3. It will decrease the re sale value of pre owned cars.
4. It will, on the negative side, promote consumption, may hike fuel prices and increase pollution and traffic congestion levels.

What do you folks think?

Quote:

Originally Posted by gemi_kk (Post 2952405)

It would be great, if you could write something about this finance and other stuff. few lines would provide the gist of the video.

Here is the gist:
1. Customer chooses the car that he/she wants to buy.
2. Customer then decides the number of years he/she wants to keep this car.
3. Customer decides the number of kilometers he/she would run the car.

On the basis of the above decisions, Toyota draws up a finance scheme which:

1. Calculates the value of the car after the period that the customer plans to return the car and ASSURES/Guarantees him/her of the buy back value.

2. Toyota then deducts this value from the value of the new car which becomes the customer's loan amount.

3. This loan amount is then split into down payment and EMIs based on the general interest rates prevailing in the market.

4. The customer also has the option of continuing with the current car by paying the remaining amount, surrendering the car or upgrading or downgrading the car depending upon his/her wish.

This makes perfect sense to people who needs a better car, but cannot afford one.

Let us take an example of a car costing 10L OTR. You give a preference of using the car for 3 years and for 40000kms. Based on these numbers, lets say the residual value of your car will be around 5L.
Toyota will reduce this amount from the OTR and given that you pay a deposit of 1L, your loan amount will be 4L for 3 years and for that the EMI would be approximately 13K per month at 12% ROI (which would otherwise be an amount of 29K per month considering a loan amount of 9L at 12% ROI).
After using the car for 3 years, you have the option to continue the car by paying the residual value i.e 5L or upgrade or downgrade depending on your wish.
So for an EMI of 13K, you can buy a better car compared to what you can afford.

Correct me if I'm wrong.

Quote:

Originally Posted by n.devdath (Post 2952440)

3. This loan amount is then split into down payment and EMIs based on the general interest rates prevailing in the market.

Are you sure about this ? I think the so called tailor made payment rates would be a lot more than general interest in the market.

In a fast changing auto sector like india, 5 yrs is considered a risk for the resale value of the cars by manufacturer. 10L SUVs which enjoyed no competition suddenly feel the heat with one duster. Hence, the guaranteed future rate will be ridiculously low because the people who decide future rate based on condition,wear & tear are the dealers themselves. We all know what rates they buy back.

Quote:

Originally Posted by speedmiester (Post 2952507)

This makes perfect sense to people who needs a better car, but cannot afford one.
So for an EMI of 13K, you can buy a better car compared to what you can afford.

How are you sure that the 10L car will be valued at 5L. For example , sx4. Now lets say you want to pick up a swift. Why would maruti sell you one at half or 1/4 of its value and make less profit when it cannot meet the demand in the market ?

Quote:

Originally Posted by n.devdath (Post 2952440)

How is this different from a lease?

The only advantage of leasing is that it helps you drive a car which is more expensive that what you can afford. But from a financial point of view it actually makes no sense for an individual doing it out of his own money.

Quote:

Originally Posted by blackbeast (Post 2952543)

Precisely Vijay, it is points like these that need to be deliberated upon.

Quote:

Originally Posted by carboy (Post 2952574)

How is this different from a lease?

Dunno, that is what I m trying to find out.

Quote:

Originally Posted by speedmiester (Post 2952507)

WOW!! You are Spot On.

This is the lease plan, which exists already.
This suits the people who are passionate drivers. Like US :D

We know, what would be the life of a MJD or JTD or TDI, in most of the cases. We discuss, share, learn and then we take decisions based on our knowledge.
We drive cars passionately rather than point A to Point B.
What would be the case of a mango man (Common Man) ?

I have seen at least 25-30 Alto's which hardly run 300-500 KMs per month. Why does such a customer would expect this plan? Most of the common people want to keep the car personal (we are more sentimental). They prefer to sell it when they do not want it, rather than regularly upgrading the cars.

This is more of western mentality, The reasons are as follows.
The major reason being, Westerners can afford Passat/Jetta/A4/BMW/Mercedes. Their average take home salary per annum would at least be 45K USD/ 35K pounds/ 45K Euros. These cars cost almost their one year salary. Such a car could be afforded in a span of 5-7 years. Which is quite possible.
The other reason being Fuel Expenses. Cost of fuel in india is damn expensive. Exception being diesel, which would reach petrol in couple of years.
The third major important reason being TAX. On a car which costs 5.8 L on road (I20 petrol Magna) The actual car cost is 3.9L and a tax of 90 K on ex-showroom. On ex showroom, there is another 80K tax in the form of Life tax. Effectively the customer is being ripped. :Shockked:

All in all, it wont be a huge hit in india. May be after 5 - 10 years down the line. i personally wouldn't prefer these sorts of plans.