Car manufacturers give a financial incentive to a select few car finance firms to push sales of their cars. This makes some of the larger car financiers more competitive than the smaller players who are not eligible to receive manufacturers' subvention. For example, a financier may receive Rs.6000 from Maruti Udyog for every Esteem car loan booked by him. Generally, the financier will build this incentive amount received from the manufacturer into the pricing of the car loan.

Let's look at an example to explain this –

As a hypothetical example, if the base rate at which a financier is willing to do business is 10.5% per year and you get an interest rate break of 0.5% per year because you hold a credit card issued by the bank (bringing down the rate to 10% per year), the manufacturers' subvention could bring down the borrowing rate further for you by 0.5% to around 11% per year.