Banks see higher growth for car loans, sales

With confidence in the economy’s growth prospects continuing to strengthen, remittances from Filipinos overseas showing no signs of drying up and interest rates remaining at low single-digit levels, the mood to buy new cars is more positive than ever.

And those who are in the market for their first car or an upgraded version of the one they have in their garage are having a difficult time choosing because there are just so many models to consider and evaluate.

The list of choices is growing even longer as car companies are pressured to come up with all-new models in a bid to win an order, particularly from the middle-income market that is proving to be the fastest-growing in the automotive segment.

White-hot competition, indeed, has helped the consumers in terms of perks, discounts and affordable interest rates on consumer car loans.

Because of these factors and the positive outlook on the economy, car sales and, consequently, car loans are expected to increase in 2013 over 2012 levels.

According to TG Limcaoco, president of BPI Family Bank, loans this year are expected to increase by at least 10 percent over last year. BPI Family Bank is one of the country’s largest providers of consumer loans including car loans.

Sales, loans remain strong

“Auto sales and loans should remain strong for the rest of the year as consumer confidence remains high. New models coming out will also drive sales,” Limcaoco added.

BPI Family Bank accounts for a significant share of total outstanding car loans in the Philippines, and Limcaoco said that the bank has purposely kept its credit standards high to ensure the sterling quality of its loan portfolio.

This adherence to the highest credit quality standards has admittedly resulted in lost market share and low downpayment schemes now prevailing in the market. Nevertheless, Limcaoco is upbeat about the growth in loans to car owners this year.

Interest rates at 6-7 percent a year are likewise fueling demand as low-cost money makes it easier for those without ready cash to purchase the car of their dreams. Low interest rates, new models and competition have thus provided a perfect environment for car companies to thrive in the Philippines.

The numbers in the first half are bearing out the positive expectations for the year with sales of the automotive industry hitting 87,226 units, the highest first-semester performance ever recorded.

Upward trend is sustainable

Antonio Moncupa, president of EastWest Bank, believes this upward trend is sustainable.

“Consumer loans in general are expected to do well. For auto, we will not be surprised to see total sales going up more than 10 percent. EastWest expects to sustain the momentum of its auto business. The positive sentiment, still-low consumer leverage and low interest rates are conspiring to push auto sales higher,” he said.

According to data from the Chamber of Automobile Manufacturers of the Philippines Inc. and Truck Manufacturers Association, the industry’s year-to-date sales is 20 percent higher than 2012’s record sales of 72,871 units.

By the end of the year, the industry is confident that it will reach the sales volume target of 200,000 vehicles. And if interest rates will stay low and the economy continues to grow at a robust pace, then there is reason to believe that the target may even be exceeded.