Easy financing for superbikes

Banks make loans available at lower rates to attract high networth customers

Gautam Bajaj, 35 years, is an IT professional working with Microsoft in Bangalore. Recently, he took a loan of Rs 4 lakh from Tata Capital to purchase the DSK Hyosung, a superbike costing more than Rs 5 lakh. Although he could afford to pay the full amount for the bike, Bajaj chose to take a loan to avoid tax-related issues and because the loan was easily available.

“I was very happy with the whole process. I got the delivery of the bike in two-three days,” says Bajaj, who uses the bike only on weekends and for long drives.

In India, the price of a luxury bike starts from Rs 5 lakh and it can go up to Rs 35 lakh or even more, depending on the model. Easy availability of finance from banks as well as non-banking finance companies for high-end two wheelers prompt customers to take up loans, even if they are not short of money.

Shiva Ray, general manager (sales and marketing) at DSK Hyosung, says: “While 60-65 per cent of our customers buy bikes on loan, many of them do so to avoid questions from the income tax department and not because they cannot afford it. Putting down such huge amounts at one time is bound to attract attention (of tax authorities). But we have also seen cases of people with a monthly salary of Rs 30,000 buying these bikes.”

For banks, offering loans for high-end bikes is one way of getting high networth customers. Curiously, many banks offer loans for luxury two-wheelers at rates lower than that for standard two wheelers.

However, the tenures may be longer. In some cases, the bank might not have an off-the-shelf loan product but could tailor one to suite the buyer’s needs. After all, someone who can afford to buy a bike of more than Rs 5 lakh could be a potential high net worth customer for the lender. The loan amounts are usually 70-80 per cent of the bike’s cost, but can also go up to 90 per cent, if the bank is happy with the customer’s profile.

HDFC Bank was the first one to launch a structured policy and process to finance superbikes, according to Ashok Khanna, senior executive vice-president and business head (vehicle loans) at HDFC Bank. “Initially, superbikes were launched in the range of Rs 10-50 lakh and our average ticket size was over Rs 9 Lakh. Later, entry-level superbikes were launched in the range of Rs 5-9 lakh and our average ticket size is over Rs 4 lakh,” he says.

S V Parthasarathy, head (consumer finance), IndusInd Bank, says that the bank is very selective about sanctioning loans for luxury bikes. “People who buy high-end two wheelers do it more as a status symbol or for pleasure. But those who take loan for standard two wheelers are people who buy them for necessity, for their daily commute,” he says.

R Vaithianathan, head (consumer finance and advisory business), Tata Capital Financial Services (TCFS), says the market for high-end bikes in India is at a nascent stage, although it is growing. “For TCFS, the current average ticket size is in the range of Rs 4-5 lakh, and over a period of time, it could increase to Rs 7-8 lakh,” says Vaithianathan.

Tata Capital typically charges 14-15 per cent for superbikes, lower than the rates for normal bikes.

In the case of HDFC Bank, too, the loan rates for a superbike are lower than that for a standard two-wheeler loan, and are charged on a reducing interest basis. For a standard two-wheeler, HDFC Bank charges a flat rate. The average tenure is 41 months for superbikes, while in the case of standard two-wheelers, it is 25 months, according to Khanna.

HDFC Bank offers a preferential service to every superbike customer. A relationship manager of the bank personally visits the customer to complete the formalities. IndusInd Bank also assigns senior staff to service high-end borrowers, while regular field staff handles customers who take standard two-wheeler loans.

Harley-Davidson has tie-ups with ICICI Bank and HDFC Bank. However, only a small percentage of customers opt for loans. The bike maker offers superbikes ranging from Rs 5.6 lakh to Rs 35.5 lakh (excluding taxes), says Anoop Prakash, managing director, Harley-Davidson India.

There is an equated monthly instalment (EMI) calculator on the company’s website (www.harley-davidson.in), with which to figure out the monthly outgo. For Harley-Davidson Superlow, priced at Rs 5.6 lakh (excluding taxes), the EMI for a five-year loan with 15 per cent down payment would be about Rs 12,000.

“While a large section of the demand comes from Delhi and Mumbai, cities like Bangalore, Ahmedabad and Chandigarh, too, have been excellent markets as a rich biking culture already exists there. We are also seeing increasing demand from the south with Kochi, Chennai and Hyderabad growing well for us,” says Prakash.