Says Harsh Rungata, head, retail finance, ICICI, that interest rates on auto loan are not expected to come down in the next three months. He says that prices are already down in the auto loan market. Clubbed with manufacturers' discount in several cases, the cost of finance to the customer is pretty low, adds Rungata. But it's difficult to make a prediction as to when the interest rates on car loan will drop further, he explains, because it will follow the general money market trend.

Another senior official of an MNC bank agrees with Rungata and says that interest rates in the auto finance sector are not likely to come down soon. Also going with the industry viewpoint is a senior manager of the Punjab National Bank. Givingthe example of PNB, he says that the rates are at an all-time low of 15.3 per cent and that it couldn't drop further, at least for the time being.

The reduction in auto finance rates happened a few months ago and all over the industry these rates continue to be competitive. But one thing about auto finance -- the rates differ from one bank to another much more than in the home loan sector and a whole lot of factors influence the rates. For example, Citibank auto loan rates range between 18 and 18.5 per cent; Stanchart in the range of 13.56 and 16.02 per cent; Hongkong & Shanghai Banking Corporation 17 per cent and upwards; ICICI 16 to 17.5 per cent; PNB 15.3 per cent. Within each bank, the rates vary with car models and duration of loan.

Perhaps there's a reason behind the widely varying pattern of interest rates in the auto finance industry. As Rungata of ICICI puts it, it's probably because of the return of the delivery era. Meaning, delivery of the car is the key issue with the customer, says Rungata.He explains: ``From the customer's point of view, he's interested in the car and not really in the loan. For the loan is just the means to the end.'' So, it doesn't bother the customer if he has to pay a little bit extra in terms of interest rates, provided he's getting the delivery of the car on time.

In this context, Rungata talks about the value-added features of auto financing picking up. And that can happen only with the car dealers and the finance companies coming closer, says Rungata. He adds that for the customer to have a composite experience, banks and finance companies should tie up with car manufacturers and dealers. Also, car dealers must not sit back, rather they should get into deeper functional tie-ups so that they're able to service customers better, he says. In fact, these are some of the concepts which are evolving in the auto segment.

Talking of concepts, while foreign and some of the leading private banks offer 0.25 to 1 per cent discounts to those having any relationship with theloan disbursing bank, public sector banks are gradually coming out of the shackles to relax the rules. Says Jain of PNB: ``PSU banks are slowly getting into the aggressive marketing ways.'' Although these banks rarely offer any discounts on loan rates to the relationship customers, they're doing away with the concept of collateral security for auto finance. Adds Jain: ``It's the walk-in concept (like it was in foreign banks) which is catching up with the PSU banks.'' At last, these banks have woken up to competition, says Jain.

And competition there is. Says Rungata of ICICI: ``For the past four to five years, the auto finance sector has been very competitive.'' Particularly with cars being manufactured in so many segments -- standard, mid and luxury -- the auto finance market has become very fragmented. On the whole, says Rungata, that the auto loan sector is much more competitive in India than the home loan segment. And the practices in the auto loan sector are being translated into the home loancategory now, adds Rungata.

Speaking about the future of the auto loan market, Rungata says that the real action is in the auto market. He explains: ``The car finance market only mirrors the action in the car market.'' So, if there's a lot happening in the car market, expect at least some of that while you go shopping for a car loan.