Affordable auto loans help rev up PH car sales
It has become fairly easy to jump on the bandwagon and get yourself a brand-new car.
Thanks to rising incomes, the growing array of vehicles that cater to various budgets starting from as low as P500,000, and attractive financing packages from the banks and the automotive companies themselves, more Filipinos are able to afford sedans, sports utility vehicles, vans or even sports cars to suit their requirements.
But most Filipinos need to secure a bank loan to get their hands on their dream car.
Local banks have been cashing in on this growing demand for a car loan, as shown in their aggressive, competitive marketing activities that offer various freebies and promos to entice first-time car buyers, or those wanting to get a second family vehicle.
Websites of some of the biggest banks in the country like Metropolitan Bank & Trust Co. (Metrobank); BDO Unibank Inc.; RCBC Savings Bank; Bank of the Philippine Islands (BPI); Security Bank; and Philippine Savings Bank (PSBank) offer a comprehensive guide on how to apply for an auto loan.
Many of these websites offer online applications; have listed all the pre and post application requirements for acquiring a loan; and even feature a so-called loan calculator so you can readily compute how much your monthly amortization will be, given your preferred downpayment scheme and repayment period.
The ease with which Filipinos are securing auto loans was deemed among the biggest factors sustaining the double-digit growth of vehicle sales in the country.
Ma. Fe Perez-Agudo, president and CEO of Hyundai Asia Resources Inc. (Hari), revealed that auto financing has indeed helped boost car sales, accounting for the majority or about 96 percent of vehicle purchases across the Hari network.
“Between the two most common forms of auto financing, low down payment and low monthly amortization, the more important consideration is low down payment, which presents a relative low cost of entry for buyers lacking large savings balances or large disposable incomes. The cost of the monthly amortization is a second consideration,” explained Agudo, who also heads the Association of Vehicle Importers and Distributors (Avid).
“Hari does provide car financing packages for some of its models, competing at the minimum approval amount accepted by banking partners which is at 20 percent to 30 percent down payment,” Agudo added.
Even the Chamber of Automotive Manufacturers of the Philippines Inc. (Campi) and the Truck Manufacturers Association (TMA) point out that the consistent strong growth in vehicle sales over the past months can be attributed to attractive and flexible financing options.
To help identify which financing package best suits your needs and ensures that you stay within your budget, you can conduct a “self-assessment” based on the bank’s requirements.
By doing so, you can see for yourself whether you are eligible for an auto loan and which vehicles will fall within your income bracket.
First, decide whether a loan will be for a brand-new vehicle or for a second-hand unit as the terms will differ.
Also check your monthly household income if it passes the bank’s requirements.
Some banks already allow those with a monthly income of about P30,000 to P40,000 to take out a loan for a P500,000 sedan, provided that you make at least a 20 percent downpayment.
But the required gross family income varies across banks.
For BPI and PSBank, it can be as low as P30,000 but for the likes of BDO, it has to be at least P50,000.
Other banks like RCBC Savings require income to be three times the monthly amortization.
One must also be at least 21 years old, and not exceeding 65 years old upon loan maturity.
Most banks require practically the same documents: a signed car loan application form, at least two valid government issued IDs, the latest income tax return (ITR) or BIR Form 2316, certificate of employment with salary, latest audited financial statements for the self-employed, and tax identification number.
Additional documents are often required after the loan has been processed.
Loans and terms
The amount that can be borrowed will depend on your capacity for repayment, and can be used mostly for purchase of passenger cars, passenger vans, trucks, sports utility vehicles, and Asian utility vehicles.
The minimum amount varies across banks, but the maximum amount is practically uniform at 80 percent of the net selling price of a brand new vehicle. The 20 percent represents the downpayment.
For pre-owned vehicles, the maximum amount that can be borrowed is much lower at around 50 percent to 70 percent of the appraised value.
For Metrobank, the minimum amount is P250,000; BDO and PSBank, P100,000; RCBC Savings, P300,000; and BPI, P200,000.
Most banks provide a repayment period of between 12 months and 60 months (one to six years), but there are a few like BDO that allow up to 72 months.
Most banks do not publish the interest rates for auto loans but instead, provide the so-called “loan calculator” wherein you can already compute your monthly amortization based on preferred terms.
These calculators will ask you to indicate whether you are buying a brand-new or pre-owned vehicle; the net selling price of the vehicle; preferred downpayment rate, whether 20, 30, 40, 50 percent or more; and preferred terms, whether 12, 24, 36, 48, and 60 months.
Some banks give an option for repayment schemes whether one month advance (OMA), which means the first monthly amortization is due upon booking of the loan and every month thereafter; or in arrears, which means that first monthly amortization is due one month after booking of the loan and every month thereafter.
Other banks like PSBank, meanwhile, have published on their website the standard rates for auto loans.
Normally, interest rates are lower for loans with a shorter repayment period and a higher downpayment.
In the case of PSBank, standard auto loan rates as of August 11 this year stood at 6.5 percent for a 12-month repayment period; 9.3 percent for 18 months; 13.8 percent for 24 months; 20.6 percent for 36 months; 27.7 percent for 48 months; and 36.1 percent for 60 months.
With OMA, PSBank’s interest rates are much lower at 5.6 percent for 12 months; 8.4 percent for 18 months; 12.7 percent for 24 months; 19.5 percent for 36 months; 26.5 percent for 48 months; and 34.7 percent for 60 months.
For some vehicle dealers, insurance policies, chattel mortgage fees and registration may be bundled in ongoing promotions. But these can also paid for through the loan.
BDO, for instance, offers all- in financing that includes chattel mortgage fees, first year car insurance program and three year registration with the Land Transportation Office (LTO).
RCBC Savings, meanwhile, offers an auto insurance package from Malayan Insurance Co. Inc.
Make sure to check ongoing promos from banks and automotive firms to get the best value out of your money.
At times, car dealers throw in a few “freebies” in the package which you might want to take note of as well.
As for the loan repayments, the most common modes would be through an auto debit arrangement with your bank or through the issuance of post debit checks.
Other banks allow payments over the counter, mobile banking and Internet banking.
Thus, given the sea of loan options available for the taking, do your research first and compare rates and terms across preferred banks before making that big purchase.
Subscribe to INQUIRER PLUS to get access to The Philippine Daily Inquirer & other 70+ titles, share up to 5 gadgets, listen to the news, download as early as 4am & share articles on social media. Call 896 6000.