Summer Project Report

On
NEED ANALYSIS
OF
AUTO LOAN CUSTOMERS

Submitted To:
ICICI Bank

Submitted By:
Pratul Lobo
MMS – Marketing

N L Dalmia Institute of Management Studies and Research, Mumbai

(Batch: 2008-10)

1
 Acknowledgement

I would like to express my sincere thanks to ICICI Bank for providing me the requisite
material to complete my project.

I would also like to take this opportunity to express my deep and sincere gratitude to
Mr. Srikanth Mahadevan, National Sales Manager (Vehicle Loans), ICICI Bank Ltd.
for his valuable insight and encouragement in implementing this project. It is because of
his support that I could synchronize the efforts in converting the manifold features of the
project.

I am really thankful to all the respondents who helped me gain the required information
and spared their precious time in order to make the research project a success.

I also would like to acknowledge the infrastructure support provided by my Director

Prof. P.L. Arya and the support of my colleagues.

Date: 1st July, 2009

Pratul C Lobo
MMS (Marketing) 2008-10

2
 LETTER OF TRANSMITTAL

Mr. Srikanth Mahadevan

National Sales Manager (Vehicle Loans)
ICICI Bank Ltd.

Respected Sir,
As per your directions, I have completed my research on “Need Analysis of Auto loan
Customers”. The report is based on interviews and responses of respondents from
Mumbai. The project was carried from 4 th May 2009 to 30th June 2009.The complete
methodology and conclusions derived on the basis of the responses is described in the
report. I believe you will find the results mentioned in the report to be interesting and
certainly useful.

3
 Table of Content
S. No Topic Page No.

1. Introduction

ICICI Bank – An Overview 5

2. Executive Summary 6

3. Methodology
a. Problem Statement and Objectives 10
b. Sampling Strategy 13

4. Summary of findings, Recommendations and Conclusion

1. Summary of findings 15
2. Recommendations & Conclusions 39

5. Appendices

1. Questionnaire 44
2. Bibliography 48

4
 ICICI Bank

Overview:

ICICI Bank is India's second-largest bank with total assets of Rs. 3,793.01 billion (US$
75 billion) at March 31, 2009 and profit after tax Rs. 37.58 billion for the year ended
March 31, 2009. The Bank has a network of 1,451 branches and about 4,721 ATMs in
India and presence in 18 countries. ICICI Bank offers a wide range of banking products
and financial services to corporate and retail customers through a variety of delivery
channels and through its specialized subsidiaries and affiliates in the areas of
investment banking, life and non-life insurance, venture capital and asset management.
The Bank currently has subsidiaries in the United Kingdom, Russia and Canada,
branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and
Dubai International Finance Centre and representative offices in United Arab Emirates,
China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary
has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary Receipts (ADRs)
are listed on the New York Stock Exchange (NYSE).

Vision:
“To become the leading player in Indian financial markets and grow our overseas
presence.”

5
 Executive Summary

Gone are the days when people would dip into their cash reserves and savings to buy
cars. Almost all – both individuals and companies – prefer to buy vehicles on
installments, because that allows them the liberty of not having to invest a huge amount
upfront. That’s the need gap being filled by almost all banks and financial institutions,
who now offer auto loans on lucrative terms to consumers, egging them to fulfill their
dreams and aspirations, just by paying some extra interest. According to industry
estimates, in the last few years alone, 60% of cars were bought through finance deals.
Two-wheelers, being cheaper, had a smaller share in the auto loans market.
With more and more attractive car and two wheeler brands and models jostling for the
consumer’s attention, banks and financial institutions, are also falling over each other to
offer the most customer-friendly loan schemes, which can suit even the most humble
earnings. That’s what creates an embarrassment of riches – a confusion over which
bank to choose and which loan to opt for.
Based on certain conditions, banks in India are more than willing to extend a car loan to
finance the major share of the car's cost.
Certain terms of services offered by Banks are explained as follows:

A secured loan
Beginning with the basics, a car loan by nature is a secured loan. The vehicle or car
you are buying will be the collateral or security for your loan. Until you complete the
loan repayments, your lender will have complete authority over the purchased car.

The margin money or down payment

Initially, for a car loan, there is some amount (usually 15% to 30% depending on the car
model and bank), which has to be paid up front to the car loan company. This amount
is called the margin money or the down payment.

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Ex-showroom or On road prices:
Some banks provide car loans at On Road Prices. This means that the loan amount
sanctioned for your cars will contain the ex-showroom price of the car plus the
insurance, the road tax and any other amount that is required. The car loan amount in
case of On Road Price will be significantly greater than the Ex-showroom price of the
car. Let us take an example.

Fixed and Floating Interest Rate:

A fixed interest rate loan is a loan where the interest rate doesn't fluctuate during the
fixed rate period of the loan. This allows the borrower to accurately predict their future
payments.

A floating interest rate loan is also referred to as adjustable, variable or flexible

interest rate loan. The home finance company will decide upon a base rate -- known
as the floating reference rate. In such a loan, the interest rate keeps changing. So, the
interest rate on the loan will go up or come down depending on how the interest rate in
the economy is moving. This, in turn, will impact the EMI.

Loan to value, a ratio of the outstanding debt on a property to the market value of that
property

Loan tenor is defined as the length of time until a loan is due.

Structured home loans are products which are mapped to specific individual needs as
against a vanilla product offered to the customers at large. These are dependent on
factors like the profile of the customer, his need, type of properties etc.

• Table repayment structure

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 This is the most common type of repayment structure where you pay regular
even amounts, subject to interest rate changes. Your early repayments are
mostly interest with a small amount of principal. As you pay off your loan, this
ratio gradually reverses.

• Step Down Payment Structure

The EMIs are large in the early part of the tenure, and are lowered after some
years.

• Step up Payment Structure

The EMI is lower in the early part of the repayment period, which gradually
increases as the income of the customer increases. Typically, in this case, the
loan is slotted into three ranches based on the potential income profile of the
customer.

• Balloon payment Structure

A balloon payment is paid back when the loan comes to its contractual maturity
– e.g., reaches the deadline set to repayment at the time the loan was granted –
representing the full loan amount (also called principal). Periodic interest
payments are generally made throughout the life of the loan.

• Bullet payment structure

Bullet payment involves payment of standardized equated monthly installments
(EMI) for 11 months of a year except for an increase in the EMI for one month
per year of the loan period.

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Motor Finance Process

• Submission of filled out Application Form.

• Login, with all required documents.
• Residence verification, Office verification and Tele- verification at residence &
office. Normally done by external agencies.
• CAM (credit approval memo) report.
• Industry credit match with other banks and finance institutions for credit history.
• Final credit approval and amount of loan eligibility are determined at this point.
• Submission of signed agreement, post dated cheques along with other necessary
documents.
• Pre-disbursal check at operations.
• Pre-disbursal call to the customer for confirming the EMI and interest rate as
documented by the customer.
• Disbursement.
• Release of payment and vehicle release order to the specified authorized dealer.
• Letter of communication send to the customer with all details for future reference.

9
 Methodology

PROBLEM STATEMENT:
To carry out a need analysis of auto loan customers and develop appropriate
products/schemes to fulfill these needs.

RESEARCH OBJECTIVES:
1. To ascertain the perceptions of customers regarding auto loan financing provided
by financial institutions.
2. To assess the auto loan requirements of car owners and prospective car owners
and
3. To develop appropriate products/schemes to fulfill these needs.

RESEARCH DESIGN:
The research group used the exploratory and descriptive design.

Benefits Of the Study:

The study will help ICICI Bank Car Loans to devise appropriate products/strategies.
These products would help to fully complement their customers’ needs with regards to
their loan requirements.

Importance of the Study:

With more and more attractive car brands and models jostling for the consumer’s
attention, banks and financial institutions are competing aggressively to offer the most
customer-friendly loan schemes. In this context, it is important to understand the
consumer buying behaviour of auto loan customers.

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Literature Review Plan:
A list of books, websites, journals and newspapers that was referred to and used for
literature review is provided.

Secondary Research:
Collection of data from websites and catalogues to understand the loan products and
charges of auto loans offered by different Banks.

Primary Data Collection Plan and Sampling Strategy:

A survey was conducted of 107 respondents. The sample was selected on a simple
random probability basis within the region of Mumbai.
The interviews were conducted and data was collected accordingly. Standard editing
and coding procedures were utilized to ensure maximum accuracy and un-ambiguity.
This includes careful interpretation and good judgment of the data. Simple tabulation
was utilized to analyze data.

Steps in the Development of the Survey Instruments

The main instrument required for survey was a well-developed
questionnaire. The questionnaire development took place in a series of steps
as described below:

Research objectives been transformed into

Step 1
information objectives.

Step 2 The appropriate data collection methods were

determined

Step 3 The information required by each objective is being

determined.

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 Specific Questions/Scale
Question/Scale Measurement
Measurements format is
were evaluated.
Step 4
developed.

Step 5 Research
The objectives
information were transformed
objectives needed wereinto
Step 6 information objectives.
determined.

Step 7 The questionnaire and layout was evaluated.

Revise the questionnaire layout if needed.

Step 8

Step9 The Questionnaire format is finalized.

Limitations of Study:
Time availability was one of limiting factor due to which we will have to limit our sample
size.
Limited choice of application based software.
Limited expertise in analysis of data through use of application based software.
Limited access to secondary data.

Bibliography: A list of books, websites, journals and newspapers that was referred is
provided

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 SAMPLING STRATEGY

1. Target Population
The Population consists of all customers desirous of financing their car purchase
through loans provided by banks.

2. Sample frame
The Sample frame consists of all customers visiting various car dealerships.

3. Sampling Method
Probability sampling is used as the sampling frame is available, population is
homogeneous and population details are available.

4. Sampling Procedure
Simple random sampling
The population has different categories like people belonging to different age groups,
different income levels each have different perceptions of a loan product depending
upon their need. So we are using simple random sampling.

5. Description of the Sample

The sample size of 107 was collected by interviewing customers at the following
dealerships in and around Mumbai:

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Dealership Brand

Concorde Motors (India) Limited (CMIL), Tata Motors

Prabhadevi
Spectra Motors Ltd, Goregaon Maruti

Laxmi Cars Pvt. Ltd., Mira Road Maruti

Autograph Cars India Pvt. Ltd, Andheri Skoda

Solitaire Honda, Borivali Honda

Modi Hyundai, Goregaon Hyundai

Ashtavinayak Auto Private Limited, Malad General Motors

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 Summary of Findings

Overview of the Sample Size:

Price Range 1-5 lakhs 10-15 lakhs 5-10 lakhs

Survey Size 65 5 37

Interpretation

The sample size indicates a larger proportion (61%) of customers visiting auto
dealerships around Mumbai had a preference for cars within the price range of Rs. 1-5
lakhs (Small Car segment).
The Mid Car Segment (34%) was preferred by customers at a price range of Rs. 5-10
lakhs.
A small percentage of the sample size (5%) preferred the luxury car segment for cars
price above Rs. 10 lakhs.

15
As part of the questionnaire, the respondents were asked to choose between 3
different banks i.e. Bank A, Bank B and Bank C offering auto loans with differing terms
of services.

The Terms of services offered by the 3 banks were as follows:

Auto Loan Services Bank A Bank B Bank C

Flexible EMI repayment Available Not Available Not Available

options
Loan Disbursement (in days) 1-3 days 6-8 days 10-12 days

Loan to Value (LTV) deal (%) 90-100% 85% 80%

*(On-Road Price)

Ceiling on Loan amount No Ceiling No Ceiling Rs. 10 Lakhs

Loan Tenor 7 6 5
(Maximum No. Of Years)
Down Payment (%) *(On-Road 0-10% 15% 20%
Price)

Prepayment charges 5% 3% 2%
*(On % of Principal Amount prepaid) *(full repayment only)

Rate of Interest 1.0-1.5% At Par 0.5-1.0% below

*(as per industry average) above

Results

Tot
Bank A Bank B Bank C al
15 61 31 107

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Interpretation:
About 57% of respondents preferred Bank B which offered a competitive rate of interest
across industry but offered more favourable terms of services compared to Bank C
which offered a lower Rate of Interest.
29 % of customers preferred Bank C offering the lowest interest rate among the 3
banks
14% of respondents preferred Bank A which offered a higher rate of interest compared
to Bank B and C, but offered far more favourable terms of services.

A more detailed explanation of the consumer behaviour of auto loan customers is

described with regards to the small car, mid range cars and the luxury car segment.
Each of these target segments have been further analysed on the basis of the age
group, income level, and profession of the respondents and their consumer
preferences.

17
 Small Car Segment

The Small Car segment consists of cars within the price range of Rs. 1-5 lakhs. The
total number of respondents in this segment was 65.

A)

Interpretation:

The data
clearly shows a
preference for
fixed rate of
interest across
all age group
categories
(76%). The
preference for a floating rate of interest forms a small but substantial proportion (31%)
among the age group of 18-30 years only. Among the older category of customers, this
preference is negligible.

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This data indicates that the risk appetite of customers in the current economic situation
is low across all age group categories.

B)

Interpretation:

55% of customer preferred a loan tenor of 5 years while only 1% of the respondents in
the small car segment preferred a loan tenor of more than 5 years. 25 % of customers
had a preference for 3 years.
The data indicates that customers do not wish to prolong their loan tenor beyond a
reasonable period of time and generally prefer 5 years as a safe and affordable period
for a loan tenor.

C)

19
Interpretation:
A majority of respondents (58%) preferred a Loan to Value Deal in the range of 80-90%
while preferences across other categories were minimal.

D)

20
Interpretation:
71% of respondents said ‘Yes’ to structured EMI payment methods which was suited to
their needs
Structured EMI payment preference was highly preferred among the younger group of
respondents. The preference for structured payments decreases gradually among the
older group of respondents.

E)

Interpretation:

Age Group

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• 18-30 years: 60% respondents preferred the Step Down payment method while
28% preferred the Bullet payment method.

• 31-40 years: 82% respondents preferred the Step Down payment method.

• 41-50 years: 88% preferred the Step Down payment method.

• 51-60 years: 50% preferred the Bullet payment and Balloon payment each.

The data indicates that the Step Down mode of payment (67%) was preferred across
all categories while the Bullet Mode of payment (22%) was the second most preferred
choice.

F)

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Interpretation: Respondents were offered three choices of banks A, B or C which
offered customers different terms of services.

Of the 65 respondents surveyed in the Small Car Segment, 58% preferred Bank B,
28% Bank C and 14 % preferred Bank A.

Age Group:

• 18-30 years: 60% of respondents preferred Bank B, 21% preferred Bank C and 19%
preferred Bank A

• 31-40 years: 69% preferred Bank B and 31% preferred Bank C

• 41-50 years: 46% chose Bank B, 38% chose Bank C and 16% chose Bank A

• 51years and above: 50% had preferred Bank B and C each.

G) Importance of Auto Loans Terms of Services:

23
Interpretation: Among all respondents, 83% ranked Rate of Interest as the most
important factor in selecting an auto loan

Interpretation: 48% of respondents selected Down Payment as the second most

important factor while 23% selected Prepayment charges.

24
Interpretation: 35% of respondents preferred the loan tenor as the third most
important factor while 25% selected Down payment and 17% loan disbursement.

Interpretation: 32% ranked Loan disbursement as the fourth most important factor
while prepayment charges, down payment and loan tenor were also given significant
importance among respondents.
Overall analysis:
• The majority of respondents ranked Rate of Interest (83%) as the most important
determining factor in selecting an auto loan.

• A low down payment was the second most preferred choice.

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• Prepayment charges, loan tenor and loan disbursement were the other important

factors identified by respondents as important in selecting an auto loan.

• After the initial two rankings, responses were varied among customers so the third
and fourth important factors were not as conclusive as the first two important
factors.

Mid-Car Segment

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The Mid-Car Segment consists of vehicles in the price range of Rs. 5-10 lakhs.

A)

Interpretation:

Age Group
• 18-30 years: 81% preferred a fixed rate of interest

• 31-40 years: 85% preferred a fixed rate of interest

• 41-50 years: 83% preferred a fixed rate of interest

• 51years & above: 100% preferred a fixed rate of interest

Overall, 84% preferred a fixed rate of interest while 16% preferred a floating rate of
interest. Thus, in the mid-car segment, it is seen that respondents preferred a stable
interest rate.

27
B)

Interpretation: About 65% of respondents preferred a loan tenor of 5 years while the
preference for more than 5 years was only 5%.
As seen in the small car segment, it is seen here as well that customers prefer a 5 year
loan period.

C)

28
Interpretation: About 65%of customers preferred a loan to value (LTV) deal of 80-90%
while 16% customers preferred an LTV deal of 90-100%. Compared to the small car
segment, a higher percentage of customers (16%) prefer an LTV deal of about 90-
100% category.

D)

Interpretation: About 68% (25 out of 37) of respondents had a favourable opinion of
Structured EMI payment methods.

Across the age groups of 18-50 years, about 70% of respondents preferred structured
EMI payment facilities which suited their need while 50% of respondents preferred
structured payments in the age group of 51 years and above.

29
E)

Interpretation:

44% of respondents (11 of 25) preferred the Bullet mode of payment while 36% of
respondents (9 of 25) preferred the Step Down mode of payment

Age Group:
• 18-30 years: 36% of respondents preferred the Step Down and Bullet mode of
payment each.

• 31-40 years: 56% of respondents preferred the Bullet mode of payment while 33%
preferred the Step Down mode of payment

• 41-50 years: 50% preferred Step Down while 33% preferred Bullet and Step Up
mode of payment each

• 51 years and above: The lone respondent preferred the Bullet mode of payment.

30
F)

31
Interpretation: The three different Banks A, B and C offered differing terms of services
with regards to the Auto Loan.
As seen in the small car segment, similarly, 54 % preferred Bank B, 32% preferred
Bank C while 14% preferred Bank A.

Age Group:
• 18-30 years: 69% preferred Bank B and 25 % preferred Bank C

• 31-40 years: 46% chose Bank B, 31% preferred Bank C and 23% preferred Bank A

• 41-50 years: 50% preferred Bank C, 33% preferred Bank B and only 17% chose
Bank A

• 51 years and above: 50 % chose Bank B and C each.

G)

Interpretation: A majority (78%) ranked Rate of Interest as the most important factor in
selecting an auto loan.

32
Interpretation: 38% chose Down payment as the second most important factor and
24% chose Prepayment charges.

Interpretation: 35% chose Down Payment while 24%chose loan tenor and 19% chose
loan disbursement as the third most important factor

33
Interpretation: 30% chose Prepayment charges, 24 % chose loan disbursement and
16% chose Loan tenor as the fourth important factor.

Overall Analysis:
• 78% chose Rate of Interest as the most important factor

• 38% chose Down Payment as the second important factor

• Prepayment charges, loan disbursement and loan tenor were the other important
factors seen by respondents as important in selecting an auto loan.

34
 Luxury Segment

The Luxury segment consists of cars priced above Rs. 10 lakhs. The total number of
respondents was only 5.

A)

Interpretation: 80 % of customers preferred the fixed rate of payment

B)

35
Interpretation: 80% of respondents preferred a loan tenor of 5 years.

C)

Interpretation: 60% customers preferred an LTV deal of 90-100% while 40% preferred
an LTV deal of 80-90%

D)

36
Interpretation: Only 40% of respondents preferred a structured mode of payment.
E) Structured EMI Payment method:

Bullet Payment – 100% (2 out of 2 customers preferred the bullet mode of payment)

F)

37
Interpretation: 60% of respondents preferred Bank B while 20% preferred Bank A and
C each.

G) Importance of Auto Loan Terms of Services

• Rank 1: 80% (4out of 5) of respondents ranked Rate of Interest as the most

important factor.

• Rank 2: 40% preferred the no Ceiling on Loan Amount (2 out of 5)

• Rank 3: Loan Tenor (40%) and Loan to Value Deal % (40%)

• Rank4: Down Payment (40%) and Loan Disbursement (40%)

38
Additional Cross Selling Services

39
Interpretations: Of the Total Sample Size of 107, the following interpretations were
obtained:

• Insurance on Loan Cover was the most preferred option among all respondents
(78%).

• Discount on Vehicle Insurance was the second preference among respondents

(59%).

• Margin Money as Fixed Deposit was the third preference among respondents
(22%).

• The other cross selling features was not popular among the respondents.

Recommendations and Conclusions

40
As observed from the summary of findings, 61% of respondents were customers of
small-cars, 34% preferred the mid-car segment and 5% of respondents preferred the
luxury car segment.

Small Car Segment:

1. About 76% of customers preferred the Fixed Rate of Interest. Floating Rate was
only popular among the 18-30years age group (31%). We can therefore infer that a
majority of customers are still risk averse while seeking a loan due to the current
economic climate.

2. 55% of customers preferred a loan tenor of 5 years while 58% preferred a loan to
value deal (LTV %) of 80-90%. Therefore, customers considered a 5 year loan
period as the optimal period for an auto loan.

3. 71% of respondents had a favorable opinion of structured EMI payment methods

and responded positively if such customized payment methods were offered. The
data indicates that the younger groups of respondents (18-30 years) were more
responsive towards a structured EMI payment method which suited their needs
whereas the older groups of respondents were more averse and preferred a
standardized EMI payment method. Overall, structured payments were viewed
favourably across all age groups except respondents above 51 years of age.

4. Across all age groups 67% of respondents who chose structured payments
preferred the Step Down mode of payment while 22% preferred the Bullet mode of
payment. This shows that people across age groups preferred to have a lower credit
liability over the years. Although the Step Down mode of payment meant a higher
payment in the initial years, the gradual reduction in EMI towards the end of the loan
period was seen as a major factor for the respondents to select this method of
structured payment.

41
 Recommendation: As the respondents generally preferred structured payments,
the Step Down and Bullet mode of payment should be promoted among the small-
car segment aggressively so the customers are more aware of the customized
forms of payments which suit their needs.

5. Among the choices of Banks provided to respondents i.e. Bank A, Bank B and Bank
C, 58% of respondents chose Bank B, 28% chose Bank C and 14% chose Bank A.

Bank C had the lowest interest rate among all 3 banks while Bank B offered interest
rates as per industry average and Bank A had the highest interest rate. Therefore,
in spite of Bank C offering the lowest interest rate, it was seen that customers
preferred Bank B. This indicates that customers are looking for a few more
favorable service terms other than only the interest rate.

6. A majority of respondents ranked the Interest rate as the most important factor in
selecting an auto loan. But customers were also looking for favorable down
payment charges, lower prepayment or foreclosure charges, loan tenor as well as a
quicker loan disbursement process.

Recommendation:

Bank B was the most selected option among respondents. Compared to Bank C,
Bank B had a higher interest rate but had more favorable terms of services which
included a lower down payment and a quicker loan disbursement process which
customers rated highly.
Compared to Bank A, Bank B did not offer the structured mode of payments which
Bank A offered but had offered lower prepayment charges and a lower interest rate.
Therefore, although structured payment methods were highly preferred among the
small car customers, the rate of interest was the single most defining factor which
prevented customers from opting for Bank A.

42
 Therefore, in order to attract a newer group of customers in this segment, the rate of
interest would need to be more competitive with industry standards, especially in
comparison to Public Sector Banks. Along with the Rate of Interest such as that
offered by Bank B, Structured Payments such as the Step Down mode and Bullet
payment would then be highly desirable among these customers.

Mid Car Segment

1. In the mid car segment (Rs. 5-10 lakhs), 84% of customers preferred a fixed rate of
payment while only 16 % were receptive towards floating interest rates. This
indicates that customers preferred a standardized mode of interest rate in this
segment.

2. 65% of respondents preferred a loan tenor of 5 years and a LTV deal of 80-90%.
16% of customers had preferred an LTV deal of 90-100% which was an increase
from those who preferred the same in the small car segment (8%).

3. 68% of respondents preferred the structured payment methods. The younger

groups of respondents (18-40 years) were more favorable towards customized
payment facilities which suited their needs whereas the older groups of respondents
were more averse to these methods.

4. In the Mid Car segment, respondents who preferred structured payment methods,
preferred the Bullet mode of Payment (44%) while 36% preferred the Step Down
mode of payment. The customers in this segment were of a higher income group
and hence, preferred the Bullet mod of payment which suited their needs. The Step
Down mode of payment would have resulted in a much higher initial payment period
and hence was not as preferred among respondents compared to the Bullet mode
of payment.

Recommendations: Respondents in this segment too, were responsive towards

structured payments than the standardized EMI option. These respondents most
preferred the Bullet mode of payment and the Step Down mode of payment to a

43
 lesser extent. Therefore, the Bullet Mode of payment should be targeted towards
the mid car segment customers.

5. Choice of Bank: 54 % preferred Bank B, 32% preferred Bank C and 14% preferred
Bank A. It is therefore seen that customers here were more sensitive towards to the
rate of interest offered. But again, along with a favorable interest rate, customers
also sought others service terms which would be more favorable to their needs.

6. Other than the Rate of Interest which was the ranked the most important factor
(78%), down payment, prepayment charges, loan tenor and loan disbursement were
ranked as important factors in determining an auto loan.

Recommendations:
Even in the mid car segment, Bank B was preferred but a higher percentage of
customers chose Bank C in this segment compared to the small car segment.
In order to attract customers in the mid car segment, a competitive interest rate
would need to be introduced such as Bank B along with the introduction of the Bullet
Mode of payment would help in attracting customers in this segment.

Luxury Segment (Rs. 10 lakhs and above):

1. Customers in this segment preferred the fixed rate of payment

2. Only 40% of customers responded positively towards structured payments.

3. Among the customers who preferred structured payments, Bullet payment was the
preferred mode of payment.

4. 60% of Bank Customers had preferred Bank b, while 20% each had preferred Bank
A and Bank C.

5. Loan tenor, LTV deal, and loan disbursement were important factors selected after
the Rate of Interest.

44
 Due to the low number of respondents in the Luxury car segment because of lack of
availability of respondents and time constraint factors, a more comprehensive
analysis could not be obtained.

Recommendations:

Customers in this segment would generally prefer, other than a low interest rate, a
hassle free documentation process and a higher LTV deal as indicted by the
ranking given to these terms of services. Even if customers here are offered a
higher rate of interest as per industry average, a higher LTV deal as well as a quick
loan disbursement process must be provided to these customers.
Additional Cross Selling Services:
1. Insurance on loan cover (Credit Assure) was well received among customers (78%)

2. Also a Discount on vehicle insurance was also preferred among respondents (59%)

3. The concept of keeping margin money as a fixed deposit for a 100% loan
disbursement was well received by 22% of customers.

4. The other services mentioned in the questionnaire were not that well received
among respondents.

Recommendations:

Insurance on loan product should be well promoted among car buyers to increase
its visibility and eventually it would lead to acceptance of the insurance product.
Also, a vehicle insurance discount should be provided to those customers who seek
an ICICI bank auto loan.

45
 QUESTIONNAIRE

Dear Sir/ Madam,

We would be grateful if you could answer the following questions honestly. Your
valuable time spared will assist us in collecting relevant data in our area of research. All
information collected will be treated as confidential. Information gathered is strictly for
research purpose.

 Please tick the check boxes wherever applicable

Name (Optional): _____________________________________________________________

Age (yrs): 18-30 31-40 41-50 51 & above

Profession: Salaried Self-Employed Business

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Annual Income (Rs):
Less than 1,00,000 1,00,001 – 4,00,000 4,00,001 – 7,00,000

7,00,001 – 10,00,000 10,00,000 & above

First-Time Buyer: Yes No

1) Which Car do you intend to purchase?

_______________________________________

2) What would be the price range of the Car you intend to purchase? (Rs. In lakhs)

1-5 lakhs 5-10 lakhs 10-15 lakhs 15-20 lakhs

Above 20 lakhs

3) What type of Rate of Interest (ROI) facility do you prefer on your auto loan deal?
Fixed Floating

4) What is the % of Loan to value (LTV) deal you expect for your auto loan?
Less than 50% 50-70% 70-80% 80-90%
90-100%

5) What is the Loan Tenor you expect? (No. of Years)

1 2 3 4
5 more than 5

6) Are you willing to utilize flexible EMI repayment facilities if offered?

Yes No

7) If Yes, please select your preference among the following flexible EMI repayment services offered.

EMI services
Step Up
Step Down
Bullet Payment

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 Rear End Balloon

8) What is the type of EMI repayment facility you prefer?

Quarterly reducing Monthly reducing Weekly reducing
Daily reducing Others (Please Mention) ___________________

9) Please see the terms offered by three different Banks A, B, and C for a particular car in your price
range. As per your requirements, please tick the Bank you would most likely seek to finance your
auto loan.

Auto Loan Terms of Service Bank A Bank B Bank C

Flexible EMI repayment options Available Not Available Not Available

Loan Disbursement (in days) 1-3 days 6-8 days 10-12 days
Loan to Value (LTV) deal (%)
90-100% 85% 80%
*(On-Road Price)
Ceiling on Loan Amount No Ceiling No Ceiling Rs. 10 Lakhs

Loan Tenor (Years) 7 6 5

Down Payment (%)
0-10% 15% 20%
*(On-Road Price)
Prepayment Charges
5%
*(On % of Principal Amount prepaid) 2% 1%
*(Full repayment only)

Rate of Interest
1.0-1.5% above At Par 0.5-1.0% below
*(as per industry average)

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 Bank A Bank B Bank C

10) With reference to the previous question and as per your selection, please rank the 4 most Important
Auto Loan Terms of Services offered.
(Rank 1 – Highest importance to Rank 4 – Lowest importance)

Auto Loan Services Rank (1 to 4)

Flexible EMI repayment options
Loan Disbursement (in days)
Loan to Value (LTV) deal (%)
Ceiling on Loan Amount
Loan Tenor (Years)
Down Payment (%)
Prepayment Charges
Rate of Interest (%)

11) What kind of additional services do you expect along with your auto loan? Please check the boxes
below:

Insurance Cover on Loan Margin Money as Fixed Deposit

Zero Balance Savings A/c for Self & 100% Loan Disbursement
International Credit Card
Discount on (Please select from below):
General Insurance premium (Vehicle) Education Loan

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 Health Insurance premium (for self and family) Personal Loan
Life Insurance premium

Bibliography

• Marketing Management - Philip Kotler

• Consumer Behavior – Leron G. Schiffman
• Newspapers:

o Times of India

o Economic Times

o Financial Express

o Business standard

• www.wikipedia.org
• www.google.com
• www.icicibank.com
• www.rupeetimes.com

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