65% ultra HNIs take loan to buy cars for tax reasons, says Kotak Wealth Management and Crisil joint study

MUMBAI: It is no secret that Ultra high networth individuals' (or HNIs') fancy big cars. But what would surprise many is that 65% of these individuals takes a car loan to buy their BMW, Mercedes Benz, Audi and so on.

"It is not that the ultra HNI is not able to make full payment out of his own pocket and buy the car outright. Instead, they buy the car in their company's name to avail of tax benefits arising due to interest and depreciation deduction," says a report titled "Top of the pyramid 2012" by Kotak Wealth Management and Crisil.

The survey has categorised the ultra high net worth segment into inheritor, self made and professional individuals. Within these categories, the inheritor client profile elicited a surprisingly high percentage of responses in the affirmative of taking a loan as a purely business like decision.

Another fact that separates the ordinary Indian from the ultra HNI is the number of cars owned by the latter, to suit their diverse needs. "On an average, the Inheritor owns 3-4 cars, while the Self-made and the Professional own 1-2 cars each. Interestingly, the number of ultra HNIs who owned more than 4 cars was more in the non-metros than in the metros," the report states.

The most preferred car, for this category however, remains an SUV/Crossover. Almost 38.7% of the ultra HNIs prefer buying a SUV/Crossover followed by ultra luxury cars

This preference is markedly higher in the non-metros compared to the metros; in the
metros, ultra luxury cars are more preferred.

"Compared with our survey last year, there is a dramatic rise in the preference for ultra luxury cars to 31.7% in 2011 from 5.9% in 2010. This is perhaps a reflection of the increased awareness luxury car makers have been able to create among the ultra HNIs for their models through targeted advertising and marketing campaigns," the report states.