Govt to Introduce New Car Financing Scheme for Small Car Buyers

The government is reportedly considering to introduce a new car financing scheme with a lower interest rate to facilitate customers who are unable to buy a new car after major price hikes during the past few years.

According to an official at the Ministry of Industries and Production (MoIP), the government is interested in facilitating the customers of small cars up to 1000 cc with reduced interest rate of around 5% to facilitate maximum buyers. However, the financing facility would also be extended to cars of above 1000 cc. The MoIP official said:

“The rate being proposed for small cars would be around 5% while 6% is being suggested for cars of more than 1000cc. The facility could boost sales in the auto industry which ultimately create business and employment opportunities.”

The official added that the facility was currently being discussed with stakeholders. Apart from the financing facility, the government has also announced reduction in general sales tax (GST) on locally assembled small cars to 12.5% from 17% in the recently announced financial budget 2021-22 followed by exemption of federal excise duty (FED) and value-added tax to give relief to middle-class car buyers.

Related: Govt Announces Tax Exemptions for 1000cc Cars

Although it is believed that car prices of 1000cc & below cars will be reduced by around Rs 125,000 on a model, however it is yet unclear since there is no official announcement from govt & the automakers regarding price reductions as of yet. Furthermore as per sources, stakeholders in the auto sector have also agreed to give incentives to hybrid cars in the upcoming new auto policy (2021-26), similar to what has been given to electric vehicles.

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