3 IN 100 CARS ON LOAN GET REPOSSESSED

You don't really own a car until you've paid every cent for it. That's the essence of taking out an auto loan from any financial institution. That's why banks have the right to repossess a vehicle whose owners have defaulted on the payments.

To shed more light on this, Inquirer Motoring sought the expertise of Jojo Victor, VP for Auto Loans for Security Bank.

Inquirer Motoring: What is a repossessed car?

JV: A vehicle is repossessed by the bank when the borrower is in default for three monthly instalments. Since the title of the vehicle (LTO Certificate of Registration) is encumbered in favor of the bank as collateral for the auto loan, the bank would take possession of the vehicle as repayment for the loan if the first way out (monthly installments) are not settled on time.

IM: In general, how does a bank or a financial institution "repossess" a vehicle?

JV: The bank can repossess the mortgaged vehicle either by asking the borrower to voluntarily surrender the unit or take possession of the vehicle via a Writ of Replevin issued by the Court.

IM: How many of those that avail of auto loans with your bank end up having their cars repossessed?

JV: Average is around 1.2 percent

IM: What is the industry average?

JV: Average of 2.8 percent

IM: What are the three most prevalent reasons auto loaners default on their pay- ments, which ultimately lead to repossession?

JV: (A) Loss of employment or source of income; (B) Delayed collections for self-employed or late remittances for OFWs; (C) Economic downturn or business reversals

IM: How do financial institutions, or your bank, lessen or avoid customers' risk of repossession?

JV: The bank would screen the profile of the borrowers using an established credit scoring system that generates a “credit score” based on client demographics to determine probability of default and expected loan performance. Credit Bureau file checking is also done to weed out those with historical adverse findings.

IM: Can the previous owner buy his or her car back after it is repossessed? If so, how stricter are the terms? Has this happened before?

JV: Yes, the entire loan balance plus accrued interest, penalties and other legal fees must be settled in full if the borrower wants to redeem his/her unit that was already repossessed by the bank.

IM: What would be your tips/advice to your would-be auto loan clients for them to avoid the penalty of repossession altogether?

JV: (A) Determine what your needs are and the corresponding type of vehicle that would address this need; (B) Have a specific budget on the type of vehicle that you need based on your repayment capacity; (C) Monitor your finances and allot the amount intended for the monthly amortization ahead of the due date; (D) Do not purchase a car for status symbol purposes but rather for the need of mobility that it should address; (E) Cost of ownership e.g. PMS, fuel, LTO Registration, Car Insurance and other ancillaries that comes with owning a vehicle must also be computed when purchasing your desired vehicle.

IM: In your current inventory, how many repossessed cars do you have that are up for sale and auction, and how long does a typical repossessed unit take to be re- sold?

JV: Around 50 percent of repossessed unit inventory are available for sale. The approximate range of anywhere from 1 to 3 months depending on the type of unit or vehicle model.