With car sales surging, several downstream industries have grown optimistic about the uptrend. Banks in particular are raking it in with the steady growth in auto loans this year and beyond , buoyed by sustained expansion in remittances sent by Filipinos overseas.
Auto loans comprise a significant portion of banks’ total loan portfolio every year. For this reason, banks try to outdo each other by putting in place marketing strategies that will attract more clients to avail of car financing.
BDO Unibank Inc., the country’s biggest lender in terms of assets and controlled by retail magnate Henry Sy, probably has been actively pursuing a share of the market in its bid to be a major player in the Asean region.
Antonio Pena, BDO senior vice president and auto loan business head of the Consumer Lending Group, said the bank offers year-round promotions for prospective car buyers. Two of its major and recurring campaigns are the BDO Deals on Wheels and Free Gas Promo.
“BDO Deals on Wheels is a pioneering one-stop shop car showcase held at least twice a year in different malls nationwide. The last BDO Deals on Wheels was held l Oct. 6-23, 2016. In the Free Gas Promo, on the other hand, successful BDO Auto Loan applicants get free gas up to P10,000 with their new car when they apply online. The promo duration was held Aug. 1-31, 2016,” Pena said.
“Apart from these two tent-pole programs, BDO Auto Loan likewise participates in various car showcases nationwide throughout the year,” he said.
He said BDO’s success in luring potential car buyers lies on its competitive rates and fast loan processing. He said loan processing can be finished as fast as 24 hours for loan applicants with complete requirements.
“Applicants can also apply online or through SMS,” he said.
Bank’s data showed that of the total consumer loans, auto loans accounted for around 22 percent as of the first nine months of 2016. Consumer loans comprise 20 percent of BDO’s total loan portfolio during the period.
With the robust domestic economy and improving purchasing power of Filipinos, Pena is confident of auto loans’ growth prospects.
“The outlook for BDO Auto Loan remains optimistic, and this is vis-a-vis to the growing auto industry. With the growth in the auto industry, requirement for financing usually follows,” he said.
He said other factors that contribute to the growth of auto loans will be the availability of new car models, affordability of car ownership, and ease and convenience of securing auto loan financing packages. He said transactions done online are very good alternative channels apart from banks’ network of branches.
The Bank of the Philippine Islands’ Auto Loan boasts faster process turnaround time, with low interest rates, low mortgage fees and a more personalized service. The clients get the best deal in terms of price and discounts.
Application for car financing in BPI Auto Loan also comes easy. Applicants can apply via the internet; at more than 800 BPI/BPI Family Savings Bank branches nationwide; or at more than 300 partner auto dealerships nationwide.
For its part, EastWest Bank, the financial services subsidiary of the Filinvest Group, not only rolls out year-round events but also partners with leading car distributors and known personalities in the showbiz industry to bring its message clear to potential car buyers.
“We have an ongoing promo of low rate and free one year car insurance for our store clients. We have also rolled out year-round events, partnering with some of the top auto brand dealers to display some of their newest vehicles, each carrying attractive exclusive financing packages. We recently held one in Trinoma, some malls in Visayas and one dealership,” EastWest executive vice president and consumer lending head Jackie Fernandez told Manila Standard.
She said to promote these promos, EastWest have recently launched its new Auto and Personal Loans ambassador, actor/singer/triathlete Matteo Guidicelli. She said Guidicelli represents the hard-working and driven individuals who EastWest Bank supports.
Fernandez said EastWest is currently one of the top preferred financing providers in the auto industry. She said processing and approval of complete applications for car loans also take less than one day. She said this immediate response to the growing demand in the auto industry has enabled EastWest to have a fair market share.
“As the auto sales have grown by 26 percent from same period last year, EastWest was able to outpace the industry growth by registering a 69-percent growth from same period last year. In fact for the last five years, EastWest Bank has grown 45 percent year-on-year as we continue to leverage on the growth of our stores and the solid partnership we have developed with auto car dealers nationwide,” she said.
Fernandez said the auto loans business is now the biggest consumer loan in the bank and accounts for 30 percent of the bank’s total loan portfolio.
Despite the positive outlook for auto loans, Fernandez admits there are indeed risks associated with this business, first and foremost is the possibility of their clients defaulting on the loans.
“Inherent in the lending business is the credit risk or the risk of client defaulting on the loan. What is important is to balance the risk against the rewards. In EastWest Bank, our processes and policies are such that we are able to discern the right credit risk and are able to balance our portfolio quite well,” she said.
Fernandez sees car financing to grow parallel with the growth of the car industry.
“We see a tremendous growth in the auto industry as a whole. With more new model introductions and improved purchasing power, the demand for vehicles will continue to increase. As a financial provider, we will see to it that those demands are met. We are committed to support the dream of the Filipino of owning their dream car through affordable financing means,” she said.
Auto sales up
The auto industry is indeed continuously growing as the latest joint data from the Chamber of Automotive Manufacturers of the Philippines Inc. and Truck Manufacturers Association showed that sales in the first nine months of 2016 hit a record 261,370 units, 26.7 percent higher than the 206,284 sold a year ago.
A Consumer Expectations Survey conducted by Bangko Sentral ng Pilipinas in July showed that the purchase of motor vehicles is one of the priorities of households receiving remittances from a relative working abroad.
Majority of OFW households allocated part of their remittances received for education (67.6 percent), medical expenses (55.2 percent), purchase of house (10.2 percent), purchase of motor vehicles (6.4 percent) and investment (3.8 percent).
Money sent home by overseas Filipinos in September rose to a nine-month high of $2.383 billion, 6.7 percent higher than the $2.234 billion a year ago. The September data was the highest since the $2.47 billion in December 2015. This brought cash remittances in the first nine months to $20 billion, up 4.8 percent from $19 billion a year ago.
Analysts believe that the strong domestic economy and sustained remittances from overseas working Filipinos are just two of the factors that could fuel consumption in the months ahead, purchasing a car included.
The economy grew 7.1 percent in the third quarter, higher than the 7 percent a quarter ago, bringing the first three quarters’ average to 7 percent, which is already the upper bound of the Duterte administration’s target range of 6 to 7 percent this year.
But of course, everything comes with a price. With all these projections for better sales and sustained growth of car loans of domestic lenders, this could mean traffic congestions especially in Metro Manila.