Banks see car loan cancellations as customers await GST-driven price drops

Menon stated that the tax cut is expected to widen mobility access and inject fresh momentum into the automotive sector during the upcoming festive season.

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As the date for the implementation of Goods and Services Tax (GST) rate cut comes close, many potential vehicle buyers deferred purchases in anticipation of lower prices.

Not only the purchase of vehicles, the customers are also deferring their car loans, which are already approved.

A senior official of a leading public sector bank told ET that in a run up to September 22, some of the customers who had their car loan approved, are now contacting the concerned branch for cancellation, as they want to purchase after the GST cuts are implemented.These customers anticipate that the GST rate cut will lower the price of passenger vehicles and also lead to subsequent reduction in the amount needed to purchase them.“Since the cancellation charges are very low compared to the benefit that they will get after September 22, borrowers are opting for a fresh loan process once the rate cuts kick in,” the official told.

It is to be noted that many banks have waived-off their processing charges on vehicle and home loans to attract customers during the monsoon period.

The cut in GST rates to 18 per cent from 28 per cent has led to a drop in prices ranging between Rs 40,000 to Rs 1,55,000 on cars and sports utility vehicles (SUVs) in the mass market segment.Vehicle sales show decline ahead of GST rate cut

Recently, data released by the Society of Indian Automobile Manufacturers (Siam) highlighted decline by 9 per cent in the Passenger Vehicle (PV) dispatches to dealerships dropped in August.

Siam Director General Rajesh Menon said the decline stemmed from automakers recalibrating dispatches amid weak consumer sentiment. “Many potential buyers deferred purchases in anticipation of lower prices following a Goods and Services Tax (GST) reduction on vehicles.”

Menon stated that the tax cut is expected to widen mobility access and inject fresh momentum into the automotive sector during the upcoming festive season.

Further, as part of the festival offers, banks give additional benefits such as zero processing fees, waiver of foreclosure charges, flexible repayment options, and even discounted rates for those with high credit scores