The bad news in the car segment doesn’t seem to end. If the rising oil prices and hike in car prices wasn’t enough, the customers would now have to deal with yet another hike in the auto loans. Following the RBI’s lead in increasing their lending rates, the banks and top financial corporations have decided to make their auto loans even more expensive. This hike would hold for all existing as well as new borrowers of car loans.

The RBI had hiked the repo rate and CRR by 50 basis points on Tuesday to reduce the supply of money in the economy and to curb demand of the people. Reacting to this news, almost all top auto financiers have decided to raise interest rates on loans. This would include the top trio of ICICI Bank, HDFC Bank and Kotak Mahindra Prime, who according to various experts have all lined up for a 50-100 basis point hike from July 1. This will be the third rate hike so far this year.

Confirming the news, Kotak Mahindra Prime CEO Sumit Bali, said, “We have decided to affect a 75-100 bps hike from July 1.” ICICI officials have said that bank would announce their hike on June 30, but declined to reveal the amount. HDFC Bank also expressed its desire to increase the lending rate, planning a 50-bps hike. “We affected a 25-bps hike in June and this is our second increase. We have no choice. I see auto demand across segments dropping by 15-20%,” said HDFC Bank EVP & head (auto loans) Ashok Khanna.

In numbers, the interest rates for small cars are 13.5-14.5%, while for mid-sized models it is 12.75-13.5%. Financial experts have said that a 100-bps hike pushes up the EMI of a three-year, Rs 4-lakh loan by about Rs 200 per month. This works out to a hike of around Rs 2,500 a year. However, since this is the third hike, the combined pinch will be around Rs 600 per month or Rs 7,000 a year. Over four years, it adds up to Rs 28,000-30,000 even for a mass mid-segment car.

This would not be the first hike of the year, for the borrowers. Most of the cars financing companies have undertaken at least one hike (in some cases two) this year. In April, all financiers went in for a 75-100 bps increase. Some followed it up with another hike in May-June.