Bangalore: You can now welcome the New Year with a shinning car parked outside your house, as it’s a great delight to know that few banks have reduced automobile loan interest rates this month and others are expected to join them soon, reports ET. So take a cheap loan and buy a new car in 2013.

Sumit Bali, Executive Vice-President, Kotak Mahindra Bank says "We have just reduced interest rates by 25-50 bps and a number of other players are also mulling the same option. Right now, the rack rates in auto loans are in the range of around 11.5-12.25 percent".

HDFC Bank is also thinking about correcting its rate strategy focusing on RBI's indication that the nation’s economic policy will shift gears from an inflation-driven one to a more growth-oriented one in the fourth quarter.

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Ashok Khanna, Senior Executive VP and Business Head-Auto Loans, HDFC Bank said "We need to take a strategic call on that immediately and we will do so. An actual rate reduction across the board may not be possible but some segment-wise options are being considered" as quoted by ET. Sources say HDFC will announce new rates by the end of this week itself.

Many car manufacturers believe that, the slight reduction of 25-50 basis point (100 basis points = 1 percentage point) in loan interest rates may not make much of a difference to the sluggish consumer buying sentiment in the automobile market.

However, the current rack rates are significantly better than the Q2 (second quarter i.e. from July-September) levels when auto loan rates hovered around the range of 14 percent. But Automobile dealers are clear that unless the loan rates come down to the levels that they were before the current economic problem started, which was around 8-9 percent, demand will not pick up.

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