KATHMANDU: Buying a car through bank financing has become significantly cheaper as Nepal’s banking system records its lowest loan interest rates on record.
According to data tracked since mid-February 2012, when Nepal Rastra Bank began publishing monthly average lending rates, current auto loan rates are at a historic low. Loan interest rates that once peaked at 15-16 percent three years ago have now fallen below an average of 7 percent. In some cases, borrowers are securing loans at just 5.5-6 percent.
The key reason behind cheaper auto loans is the sharp decline in banks’ base rates. Since November 2023, banks have consistently lowered deposit interest rates, reducing overall funding costs. As a result, the average base rate has dropped to around 5.33 percent, the lowest level so far.
Banks are allowed to add a premium of up to 5 percent on the base rate. However, due to excess liquidity in the system, customers with good bargaining power are currently securing loans with premiums as low as 0.5-1 percent. This has brought floating auto loan rates down to the 5.5-7 percent range.
Banks are also offering fixed-rate auto loans at competitive rates. Fixed interest auto loans are currently available between 7 percent and 9-10 percent, with repayment tenures ranging from five to seven years.
Lower interest rates directly reduce the total cost of vehicle ownership. Monthly interest payments are smaller, making car loans more affordable for a wider group of buyers.
Banks offering the lowest-interest auto loans
Auto loan rates depend largely on individual banks’ base rates.
- Rastriya Banijya Bank currently has the lowest base rate at 4.42 percent. With a 1-1.5 percent premium, borrowers can secure loans at below 6 percent.
- Everest Bank and Nepal Bank also have base rates below 5 percent. Nepal Bank has introduced a dedicated auto loan scheme at 5.63 percent.
- Agricultural Development Bank, Nabil Bank, Global IME Bank, Nepal Investment Mega Bank, Sanima Bank, Prabhu Bank, Laxmi Sunrise Bank, Machhapuchchhre Bank, and NMB Bank have base rates between 5 and 5.5 percent. Auto loans from these banks are available at around 6-6.5 percent.
- Nepal SBI Bank, Siddhartha Bank, Kumari Bank, Citizens Bank, Himalayan Bank, and Prime Commercial Bank have base rates between 5.5 and 6 percent, with auto loans generally priced around 7-7.5 percent.
- NIC Asia Bank currently has the highest base rate at 6.41 percent, making its auto loans comparatively more expensive.
