Avia Collinder, Business Reporter
Riding the bullish auto market that was in play up to 2007, and for a time in 2008, commercial banks, in this wave of consumerism, became accustomed to doing booming business from car loans.
But now with new and used-car dealers reporting more than 50 per cent declines in car sales, the banks' marketers are challenged to attract auto-loan customers - interest rates specials being the most popular enticement.
By the banks' own accounts, they began reducing car-loan rates even before any downward general rate adjustments were considered in response to the central bank's recent lowering of the benchmark rates by a total 4.5 per cent in a series of cuts since July.
FirstCaribbean Jamaica, one of three banks to have reduced rates, said that even before that general rate cut, interest rates for auto loans had already been reduced from June.
Now RBTT is following suit, announcing this week new loan rates effective November 1 of 20 per cent for motor vehicles up to one-year-old and 21.75 per cent for vehicles older than a year.
The bank noted, however, that it does not finance pre-2004 vehicles unless additional collateral is provided.
Scotiabank is going further with a new-car rate as low as 19.25 per cent.
Qualified clients
The offer, which was introduced in July, is still available to qualified clients but for a short period to October 31.
Without giving numbers, Scotiabank's Elena Villafana-Sylvester, vice-president of electronic financial services and retail banking, said auto loans have fallen off this year in keeping with the downward spiral in car sales.
And where purchases are in fact financed through the bank, rides in the $2.5 million to $4.5 million price range have been the most popular.
Despite the general downturn in business, BNS claims that it is increasing market share, hailing a recent 10 per cent quarter over quarter growth in new car loans as "a significant achievement in a declining market".
In August, Scotiabank partnered with Stewart's Auto Sales to offer a waiver of the first instalment on new-car loans. The offer runs to October
First Global Bank (FGB) last set rates in January at 19.75 per cent and maintained them there notwithstanding a 30 per cent decline in car loans, according to Kerry-Ann Stimpson,
First Global's auto-loan rate is a shade below its 20.75 per cent base lending rate.
The bank says it issued 92 car loans between January and September this year, compared with 133 for the same period last year.
"The general mood of our clients is a virtual aversion to new credit and a shift towards saving and investing," Stimpson told Sunday Business.
"This is quite understandable as we encourage sound personal financial management practices by our clients."
First Global is now banking on the general move towards lower interest rates as well as the Government's recently announced tax incentives to car dealers to improve sagging car purchases and financing deals.
At the same time, the bank, which recently suffered major losses from irregular bond trades by a senior staffer, is putting a positive spin on its credit risk practices in relation to its car-loan portfolio.
"Prior to, and in spite of, these challenging times, FGB has also been proud of its credit-risk practices and continues to enjoy a low-key return rate on its motor vehicle loans," said Stimpson.
She said in the January to September 2008 period, 10 vehicles were repossessed, while only seven vehicles were collared by the bank for overdue debts in the same period this year.
Drumming up support
Not to be outdone, big bank, NCB has since September been attempting to drum up support for its 19.75 per cent 'special rate' for new and used-motor vehicles.
Noting that car loans were only 0.5 per cent of the bank's retail loan portfolio, Kerine Hamilton, marketing manager at NCB Business Services, said car loans were "performing in line with expectations" given the current damper on car purchases and the associated loan demand.
NCB's special includes "no principal payments" for up to three months.
avia.collinder@gleanerjm.com