Its double whammy for the Indian car buyer. Firstly it were the manufacturers which increased the prices of cars due to increase in material cost, across the board and now its the turn of the banks, causing steep increase in the cost of possession.

The increase from the manufactures side is between Rs. 4000 to Rs 18,000 depending on the car you are buying. An increase in interest rates will result an extra Rs 3600 burden over a period of fiver-year finance deal for a Rs 1 lakh loan. This will go up depending on the loan amount.

With RBI announcing hike in the CRR (cash reserve ratio), banks are also feeling the pinch, forcing them to increase interest rates.

“Rising rates as well as extension of loan duration by customers to reduce the impact of higher rates have increased our cost of finance,” said a senior executive of ICICI Bank, the country’s largest auto financier.

ICICI bank has already raised the interest rate on Auto loan from the earlier 13.75% - 14.25% to 14.5% to15%, an increase of .75% The second largest player in the Auto loan industry HDFC will be charging 50-75 basis points more from the first week of May.

Sales of passenger cars grew 12% in March to 1.28 lakh unit but it may not continue as increasing costs will influence buying decisions.