With volumes soaring, car makers are working out customised loan schemes in collaboration with private banks and finance companies offering effective interest rates of 6-7 per cent.

Thus, car makers like Hyundai Motor India are negotiating the subvention with financiers, especially on their larger selling models, and getting customers the best rates. Others are not far behind and are expected to unveil similar packages in about a month, ahead of the festival season.

Under the customised schemes, banks and finance companies would cut the direct sales agents out of the loop and route the commission of 3-4 per cent to buyers through automobile companies and their dealers, banking sources said. Car makers, however, refuse to divulge details.

"We get 4.5 per cent commission which, when passed on to a customer, will mean an effective rate of 6 per cent on a loan carrying a 10.5 per cent interest rate," said a Telco dealer.

Ford India had also worked out special schemes with its financiers, said Vinay Piparsania, vice-president at Ford India. "These are customised, period schemes. Like, we have a centenary scheme running this year," he said.

DaimlerChrysler India also had a similar promotional scheme with ICICI Bank some time ago. Suhas Kadlaskar, head of corporate affairs and finance at DaimlerChrysler India, said: "We had schemes where we offered rates of 8.4 per cent. We do not believe in subvention. But financiers may have offered even lower rates."

For the moment, however, the rate you get depends on your negotiating skills. The lower interest regime is most prevalent in the B and C segment cars where volumes are rising 15-20 per cent, creating more scope for negotiating discounts.

Public sector banks are, however, staying away from such deals. Citing a Reserve Bank of India missive to this effect, the state-owned banks are not willing to link interest rates to subvention. They are instead factoring them in the principal, which will also result in lower equated monthly instalments.

An executive of Maruti Udyog's biggest dealer in Delhi, Competent Automobiles, said if one were to merge the discounts and payouts into the instalments, the effective rates in the case of B-segment cars like WagonR, Zen and Alto, would be below 6 per cent. The rates could be even lower as one moves up the value chain.

According to V Vaidyanathan, business head (car financing) at ICICI Bank, these are specially worked out rates between the financier, manufacturer and the dealer, wherein each puts in a certain contribution for the ultimate benefit of the customer.

"There are instances where the interest rate is even zero. But most of the financing is for a 3-5 year period. As the tenure increases, the rates go up. Our deal with Hyundai is a customised one. We are working out similar deals with other companies," he added.