Banks slow down on car loan processing

Banks are slowing down the processing of car loan applications while car companies are encouraging purchases on cash basis even as the industry is seen to end the year with 275,000 unit sales, according to Kia Philippines.

Manny Aligada, president of Kia Philippines, said during a webinar that while banks are actively lend, taking out loans can take longer than usual.

“Banks are active once again but they now have to provide deeper scrutiny, one if the applicant is employed and second if the industry he is in is also a going concern,” said Aligada adding that banks are doing additional background checks if the borrower is still employed to validate his capability to continue paying for the loan and if he belongs to an industry that is heavily impacted by the financial crisis due to the COVID-19 pandemic.

In the case of the Ayala-owned Kia, its main partner bank is BPI Family Savings Bank.

Because of the deeper scrutiny that financial institutions have to go through, Aligada said loan processing is taking three weeks from what used to be only a few days pre-COVID.

Aligada has appealed to banks to improve the processing to two weeks to help provide capacity for the industry. In the case of Kia, Aligada said they are helping their dealers to pre-screen applicants so prospects can stand better chances for approval.

Aligada explained that banks are tightening up the screening of applicants because they have also a portfolio to protect. With the gradual reopening of the economy, he said car loan application processing should be improving.

As car loan approvals are taking longer, car companies are also encouraging car purchases on cash payments by offering heavy discounts.

“If you have cash, today is the best time to buy,” said Aligada citing huge discounts for its vehicle models of as much as ₱70,000.

“If you are a cash buyer then we give you opportunities that are better than the usual prices, but if you have no cash outlay we also make sure that banks are there to support,” he added.

Meantime, Aligada said that while the Philippine automotive industry suffered a 52 percent decline in sales so far, he was still optimistic the industry can achieve a lower decline in the coming months. He projected sales to improve to 275,000 units by end this year from 417,000 units last year noting the uptick in sales after the steep declines in April.

Last year, Kia Philippines contributed 1.2 percent of total sales to settle in the 10th sport among local players. At 275,000 unit projected sales, Aligada expressed hope to improve its market share to 1.5 percent to 1.6 percent this year.

In fact, Kia is optimistic that it is expanding its current 30 dealership network to 34 by end this year with the opening of new dealerships in BGC, Marikina, Fairview, and Santiago, Isabela. It is also adding four more to have a total of 38 outlets in 2021 when the industry is expected to fully recover.