Plastic money accelerates sale volume of two wheelers

CHENNAI: Paying for the latest android phone or LED TV with your credit card? That's so passe. The new trend is to use your credit card to buy motorcycles and scooters.
Although restricted to a small percentage of transactions - given that credit card ownership is an urban phenomenon - two wheeler companies and financiers are seeing customers flashing their plastic to pick up vehicles, either to make the entire payment or, more commonly to make the down payment.Given that the ticket size in two wheeler sales is quite small, these transactions are beginning to pick up speed.
Said YS Guleria, VP sales & marketing, Honda Motorcycle & Scooter India (HMSI): "In the immediate future two wheeler financing will attract the interest of many credit card companies as more and more customers simply buy a scooter or a bike on their credit card. Already this trend is visible and some of our privileged customers are offered this facility. Of course this is a small segment because mostly urban customers use credit cards. But since the ticket size is small - around Rs 50,000 on an average - with rising income, consumers, particularly first time buyers, are opting for it, preferring to take financing for other big ticket items like homes for example," he added.
Financing is comparatively much smaller in two wheelers than in cars. Whereas more than 80% of cars are financed, in two wheelers it is around 35%. But the good news is that the trend is growing as more banks and NBFCs are coming into the market after withdrawing from it during the crash of 2008. "The two wheeler industry has seen financing increase from 32% to 35% whereas Honda's financing share has gone up from 28% two years ago to 33% now," said Guleria.
With financed vehicles still just one-third of the total number sold, credit card sales are obviously a very small percentile, say sources. Said Eric Vas, president-motorcycle business, Bajaj Auto: "Credit card purchase is less than 1% of sales made by our dealerships, and the percent has not shifted from the previous year."
Big ticket financiers of course have already spotted this trend. Said Ashok Khanna, senior EVP & business head, vehicle loans, HDFC Bank: "Credit card transactions are restricted to down payments on some dealerships which could be around 2-3% of transactions." Agreed Subhasri Sriram, ED of Shriram City Union Finance: "We have noticed a trend in the past where some customers have used their cards to the margin money of the asset (two wheeler) upfront." The margin money component, she said, ranged from 15% to 25% of the value of the vehicle.