Palio Not considered as a good buy by banks??

sqwall · 9th July 2007, 17:03

Hi,

I have my heart fixed on buying the Plaio 1.6 stile sport.
Took a TD sometime back and fell in love.

When it came to finance I applied for a seven year term loan(wanting to keep my monthly outgoing minimum), but the bank only approved for 5 years.When I asked for the reason they told me that Palio is not considered to be a good buy.I was taken aback by this silly comment.
I even tried to talk with SBI guys they told they can finance it for 5 and not 7 years , no reason provided.

Is it true that Palio has a bad rapo with banks?

Do i still go ahead and get the car?

Jaggu · 9th July 2007, 18:03

go ahead its a good car, banks look at resale and residual value and both of them are bad in Palio's case and hence the issue.

moralfibre · 9th July 2007, 18:07

As Jaggu stated, the Palio's command a very poor resale value thereby making it difficult for the banks to recover the loaned amount in case you default to make payments in time. Hence to minimise risks involved they give you a lesser term period and in case of stupid banks like ICICI, they charge a higher rate of interest. Me and a friend took loans from State Bank of India and they voluntarily gave it at 9.75% for 7 years to my friend and at 9.50% for 5 years for my car. Mind you this is On - Road funding and it was worth the hassle I took for documentation!!

Hellcat · 9th July 2007, 18:08

Why don't you speak to the dealer for the finance, I am sure they will work out a loan term you are looking for. Have you tried UTI Bank and Kotak Mahindra.

Hellcat

moralfibre · 9th July 2007, 19:02

As opposed to Hellcat's view, I wouldn't take a loan by keeping my dealer in loop simply because the dealer sales team get a commission amounting to a certain percentage from the finance company for recommending and signing up a customer for their banks loan option. Its better to do it directly with banks and working out a deal.

Nimz · 9th July 2007, 19:08

As far as I know.. SBI does not look at the brand of the car you get for approving a loan. But I guess in your case they have.. beats me!!

theMAG · 9th July 2007, 19:10

Wow - that was some news. While the banks look at it from a purely biz sense, if you like the car pick it up. You'll be long harping abt its brilliance to your grandchildren. This being the Palio 1.6, btw.

Mpower · 9th July 2007, 19:26

hi depriciation = high risk = higher interest rate (this is how it should work)

ravibhat · 9th July 2007, 19:28

Pailo is good car buy it if you liked it. I have heard same story about Banks
not ready to give long term loan on cars with poor resale value.

Regards,

Ravi.

Sudipto-S-Team · 9th July 2007, 19:35

Quote:

Originally Posted by moralfibre

As opposed to Hellcat's view, I wouldn't take a loan by keeping my dealer in loop simply because the dealer sales team get a commission amounting to a certain percentage from the finance company for recommending and signing up a customer for their banks loan option. Its better to do it directly with banks and working out a deal.

There is no known way of avoiding a commission being paid to someone - whether openly or secretly. Even if you go directly to a bank the loan will get officially routed through a DSA (in most cases the dealer from who you are buying) without your knowing about it. No bank will risk antagonising the dealer.

The best way to deal with this situation is to find out who will pass on the maximum commission back to you.

The dealer can recommend a few private financers but I doubt if you will get a decent deal from them as compared to the rates a bank can offer. I don't see any private financer offering you a loan for seven years on a Palio unless you pay them a substantially higher rate of interest.

Try raising the down payment amount a bit, if the monthly outgo is a major issue. Talk to multiple banks and choose the one that offers the lowest EMI. When you ask for a quote do tell them openly that you will take a quote from every one - don't feel shy about saying this. It will ensure that you get the best rate.

Sudipto

hvkumar · 9th July 2007, 19:35

This is a normal credit risk management tactic by banks - where the car is not popular and has poor resale value, they either restrict or reject financing. Even insurance companies do the same thing - for instance, in the case of the Daewoo Matiz, I have been told that most insurance companies refuse to provide comprehensive insurance cover for the same reasons - non-production car, poor resale value, no company service support, etc.

squarecut · 9th July 2007, 19:42

Be it car loan or housing loan, ypu pay less if you take a loan for less duration, and lesser still if you prepay the loan. That way, I think it is in your financial interest to take a loan for less tenure and finish it off even earlier. If I were you, I will not be lulled by the hype that longer tenure is easier on the wallet. That is not the case, you just have to check it yourself.

If you can afford the higher EMI, you should go for a low tenure loan, and finish it even earlier. That way, you will save considerable amount of interest.

sqwall · 9th July 2007, 20:21

Doesnt the tie up with tata supposed to resurrect fiat in India.

A colleague of mine referred someone to process my loan, apparently he got a loan for 7 year term on a Maruti through this guy.
Later I find out that this loan guy works for the dealeship from whom I want to pick the car.
Anyways I feel the offer is not that bad with an emi of 2274 per lac(Please let me know your views on the figure).

CrAzY dRiVeR · 9th July 2007, 20:33

Palio resale value goes really down to below 2L in 2.5 years.

Thats the main reason the banks dont give long term loan on the Palio. And one of the reasons why palio is the most VFM purchase as second hand car.

sqwall · 9th July 2007, 20:41

I tried to get info from someother banks.
HDFC and Kotak also dont finace it for 7 years.

I dont mind taking the 5 year option, ill be saving on interest afterall.

9th July 2007, 17:03	#1
sqwall BHPian Join Date: Jun 2007 Location: Madison, USA Posts: 59 Thanked: 0 Times	Palio Not considered as a good buy by banks?? Hi, I have my heart fixed on buying the Plaio 1.6 stile sport. Took a TD sometime back and fell in love. When it came to finance I applied for a seven year term loan(wanting to keep my monthly outgoing minimum), but the bank only approved for 5 years.When I asked for the reason they told me that Palio is not considered to be a good buy.I was taken aback by this silly comment. I even tried to talk with SBI guys they told they can finance it for 5 and not 7 years , no reason provided. Is it true that Palio has a bad rapo with banks? Do i still go ahead and get the car?
	() Thanks

9th July 2007, 18:03	#2
Jaggu Team-BHP Support Join Date: May 2004 Location: Bangalore Posts: 20,215 Thanked: 15,907 Times	go ahead its a good car, banks look at resale and residual value and both of them are bad in Palio's case and hence the issue.
	() Thanks

9th July 2007, 18:07	#3
moralfibre Team-BHP Support Join Date: Dec 2004 Location: MH-12 Posts: 8,451 Thanked: 13,973 Times	As Jaggu stated, the Palio's command a very poor resale value thereby making it difficult for the banks to recover the loaned amount in case you default to make payments in time. Hence to minimise risks involved they give you a lesser term period and in case of stupid banks like ICICI, they charge a higher rate of interest. Me and a friend took loans from State Bank of India and they voluntarily gave it at 9.75% for 7 years to my friend and at 9.50% for 5 years for my car. Mind you this is On - Road funding and it was worth the hassle I took for documentation!!
	() Thanks

9th July 2007, 18:08	#4
Hellcat BHPian Join Date: Jul 2005 Location: Bangalore Posts: 222 Thanked: 5 Times View My Garage	Why don't you speak to the dealer for the finance, I am sure they will work out a loan term you are looking for. Have you tried UTI Bank and Kotak Mahindra. Hellcat
	() Thanks

9th July 2007, 19:02	#5
moralfibre Team-BHP Support Join Date: Dec 2004 Location: MH-12 Posts: 8,451 Thanked: 13,973 Times	As opposed to Hellcat's view, I wouldn't take a loan by keeping my dealer in loop simply because the dealer sales team get a commission amounting to a certain percentage from the finance company for recommending and signing up a customer for their banks loan option. Its better to do it directly with banks and working out a deal.
	() Thanks

9th July 2007, 19:08	#6
Nimz BHPian Join Date: May 2007 Location: Bangalore Posts: 594 Thanked: 198 Times View My Garage	As far as I know.. SBI does not look at the brand of the car you get for approving a loan. But I guess in your case they have.. beats me!!
	() Thanks

9th July 2007, 19:10	#7
theMAG Distinguished - BHPian Join Date: May 2006 Location: Avon, CT Posts: 7,217 Thanked: 1,807 Times View My Garage	Wow - that was some news. While the banks look at it from a purely biz sense, if you like the car pick it up. You'll be long harping abt its brilliance to your grandchildren. This being the Palio 1.6, btw.
	() Thanks

9th July 2007, 19:26	#8
Mpower Senior - BHPian Join Date: Mar 2005 Location: Bangalore Posts: 10,409 Thanked: 1,730 Times View My Garage	hi depriciation = high risk = higher interest rate (this is how it should work)
	() Thanks

9th July 2007, 19:28	#9
ravibhat Senior - BHPian Join Date: Jul 2006 Location: Bangalore Posts: 2,256 Thanked: 37 Times View My Garage	Pailo is good car buy it if you liked it. I have heard same story about Banks not ready to give long term loan on cars with poor resale value. Regards, Ravi.
	() Thanks

9th July 2007, 19:35	#11
hvkumar Senior - BHPian Join Date: Nov 2006 Location: Mumbai Posts: 7,369 Thanked: 3,454 Times	This is a normal credit risk management tactic by banks - where the car is not popular and has poor resale value, they either restrict or reject financing. Even insurance companies do the same thing - for instance, in the case of the Daewoo Matiz, I have been told that most insurance companies refuse to provide comprehensive insurance cover for the same reasons - non-production car, poor resale value, no company service support, etc.
	() Thanks

9th July 2007, 19:42	#12
squarecut BHPian Join Date: Feb 2007 Location: Jabalpur Posts: 87 Thanked: Once	Be it car loan or housing loan, ypu pay less if you take a loan for less duration, and lesser still if you prepay the loan. That way, I think it is in your financial interest to take a loan for less tenure and finish it off even earlier. If I were you, I will not be lulled by the hype that longer tenure is easier on the wallet. That is not the case, you just have to check it yourself. If you can afford the higher EMI, you should go for a low tenure loan, and finish it even earlier. That way, you will save considerable amount of interest.
	() Thanks

9th July 2007, 20:21	#13
sqwall BHPian Join Date: Jun 2007 Location: Madison, USA Posts: 59 Thanked: 0 Times	Doesnt the tie up with tata supposed to resurrect fiat in India. A colleague of mine referred someone to process my loan, apparently he got a loan for 7 year term on a Maruti through this guy. Later I find out that this loan guy works for the dealeship from whom I want to pick the car. Anyways I feel the offer is not that bad with an emi of 2274 per lac(Please let me know your views on the figure).
	() Thanks

9th July 2007, 20:33	#14
CrAzY dRiVeR Team-BHP Support Join Date: Jun 2006 Location: Bangalore / TVM Posts: 17,181 Thanked: 73,509 Times View My Garage	Palio resale value goes really down to below 2L in 2.5 years. Thats the main reason the banks dont give long term loan on the Palio. And one of the reasons why palio is the most VFM purchase as second hand car.
	() Thanks

9th July 2007, 20:41	#15
sqwall BHPian Join Date: Jun 2007 Location: Madison, USA Posts: 59 Thanked: 0 Times	I tried to get info from someother banks. HDFC and Kotak also dont finace it for 7 years. I dont mind taking the 5 year option, ill be saving on interest afterall.
	() Thanks