Repo Rate Increased: Many companies have increased car prices this month. On the other hand, the Reserve Bank of India (RBI) has also increased the repo rate. The interest rate has been increased by 40bps (Basic Points). The effect of this will be that the monthly installment (EMI) of the vehicles which are now taken on loan will be higher. That means buying a car on loan will become expensive. Now those who buy cars, bikes, scooters with the help of vehicle loan will find it expensive.
The repo rate was increased four years ago
The repo rate is the amount paid by RBI to commercial banks. An increase in this means an increase in interest rates which will increase the EMI of the people more than before. The last time the repo rate was increased to 4% in August 2018, which is now 4.40% after 4 years.
Things are worse than ever in the passenger vehicle segment
On repo rate hike, FADA President Vinkesh Gulati said that with the RBI raising repo rate by 40bps, it has become expensive for everyone to take auto loan. Due to the long waiting period, the difficulties of the passenger vehicle segment have increased. The two-wheeler segment is not performing well in rural areas. In such a situation, after the price of two-wheelers has gone up, now with the increase in repo rate, buying them has become even more expensive.
The EMI will remain the same if the loan period is extended
If you do not want to increase the burden of EMI on yourself then your bank can extend your loan period by keeping the same EMI as before. This means that the loan you took earlier for 160 months can be done for 162 or 165 months. RBI raising repo rate will increase the EMI of other loans like your home and car loan. This is because banks generally pass on the burden of increased repo rate to their customers instead of bearing it themselves.