Finance companies lobby for skimpy down payments on motor cars, three-wheelers
Sri Lanka’s finance companies are continuing to lobby the regulators to bring down the down payments on motor cars and three-wheelers in a bid to propel their leasing portfolios, which have experienced a hit in the recent times.
The country’s Central Bank early this year lowered the Loan-to-value (LTV) ratios on motor car leases and loans to 50 percent and to a low of 25 percent on three-wheelers to rein in consumption credit, which is deemed unproductive.
Lower LTVS lead to higher down payments being paid by buyers effectively discouraging them making a vehicle purchase.
Lower LTVS are also aimed at curbing vehicle imports flooding the Sri Lankan roads, which are already jam-packed.
But the move had little impact as still over 30,000 vehicles are being imported to the country every month— unsustainable for a country where the expansion of the road network hasn’t been able keep up with the massive increase in vehicles. “FHASL continues to make submissions to the CBSL and the Ministry of Finance seeking an increase in the LTV ratios applicable to motor cars, vans, SUVS and three-wheelers”, said Kithsiri Wanigasekara, the Chairman of the Finance Houses Association of Sri Lanka (FHASL) representing 43 registered finance companies.
However, it is an open secret that both banks and finance companies have since been circumventing the Central Bank direction on LTVS by structuring different financing arrangements to bridge the gap required for the lessee, allowing the customer to enjoy a 100 percent lease.