Understanding Electric Vehicle Financing and Loan Rates
Electric vehicles (EVs) are becoming popular quickly, providing a greener option than the usual gas and diesel cars. But, there’s a key point prospective buyers must weigh-the finance angle of these vehicles. Do EV loans have the same rates as gas or diesel vehicle loans? The answer isn’t straightforward-it’s both yes and no. Let’s unravel the puzzle of EV financing rates in this piece. We’ll contrast it with ordinary car loans, and explore why banks can be reluctant to finance electric vehicles.
When it comes to financing rates for electric vehicles, the landscape can be quite varied. Generally, EVs can cost about the same, and sometimes even less, than their gasoline counterparts. For instance, according to Yogesh Kabirdoss and Nandini Sengupta of Times of India, the loan rates for gasoline and diesel cars typically range between 9.3% and 10.3%. However, the scenario differs when it comes to two-wheelers and electric two-wheelers.
For two-wheelers, loan rates can be higher, ranging between 16% and 20%. In contrast, loan rates for electric two-wheelers are even steeper, falling between 18% and 22%. On the other hand, EVs and SUVs generally enjoy lower loan rates, usually between 8.5% and 9.5%. Interestingly, even for the same brand, financing rates for EVs tend to be lower than those for standard vehicles. This is affirmed by lenders and dealers alike, highlighting a trend towards more favorable financing conditions for electric vehicles.
Despite the growing market for electric vehicles, banks exhibit a certain degree of hesitation in financing them. The primary reasons for this include uncertainties surrounding the life, replacement, and repair of EV batteries. Karthikeyan Srinivasan, CEO of IndoStar Capital Finance, notes that banks are waiting for a stable secondary or resale market to develop before fully committing to EV financing.
Recent Changes in Electric Vehicle Financing Rates
Over the past year, there have been notable changes in the financing interest rates for electric vehicles. Indian Overseas Bank, a public sector bank, has increased the rates for four-wheel EVs by 25 basis points, resulting in a current range of 8.65-10.15% from the previous 8.4-9.9%. This adjustment is attributed to changes in the repo-linked lending rate.
Despite this increase, the bank continues to offer an 11% interest rate for electric two-wheelers and presents an additional 0.2% interest concession for electric four-wheelers as part of their initiative to promote renewable energy. Similarly, L&T Finance has also raised their EV financing rates by 1-1.5 percentage points over the past year, with current rates standing between 8.5 and 9.5% (flat). These fluctuations are largely due to varying client risk profiles, as highlighted in a report by Times of India.