Banks cut car loan rates as market expands
Some local commercial banks are writing car loans at cheaper rates as demand for motor vehicles continues to climb and new auto traders hang their shingles.
Lynvalle Hamilton, president of the Jamaica Used Car Dealers Association (JUCDA) and owner of the Auto Channel pre-owned car dealership, said about 30 new players entered the car sales market in 2016. Concurrently, the price of cars been falling since the start of that year, he told Gleaner Business.
CIBC FirstCaribbean International Bank Jamaica is among the lenders reporting a rising motor-loan portfolio.
"There appears to be a resurgence in the inventory of motor vehicles being imported into the island, and, by extension, those financed by financial institutions," said CIBC FirstCaribbean via email, " ... We have seen modest growth in this area,"
While attempts to secure current motor import data from Statin and the Trade Board were unsuccessful up to press time, port company Kingston Wharves Limited (KWL) which says it handles 80 per cent of motor vehicles intended for the local market, has seen a marked increase in import volumes.
The periods 2015 and 2016 were bumper years, according to Simone Murdock, marketing and client services manager at KWL, with "massive" increases in the number of cars imported for local sale.
Compared to 2014, when imports were only 15,207 vehicles, the numbers have since doubled. In 2015, motor vehicles spiked to 21971, and then to 31,231 last year.
Chairman of the Automobile Dealers Association, which represents new-car dealers, Kent LaCroix, said that the increase was not reflected in the new car segment, which imports approximately 8,000 cars each year.
"We do not have any massive inventory. We manage our business very well," he said.
In 2016, he said, the association's 18 members sold 6,000 cars, just a little more than the year before, and reflecting more buys by car rental agencies, he said.
But, in the pre-owned market, which has exponentially more players than the new-car segment, Hamilton said the demand was strong last year, partly fuelled by the Holness administration's promise of $18,000 more of untaxed income monthly for workers and cheaper bank loans.
JUCDA has 151 members.
"Rates were down and people were more confident," he said, explaining what he believed was the cause for "very strong demand", starting in 2016.
As to the high number of imports, this he said was due to about 30 new players entering the used-car segment.
As the sector grew, Hamilton said, the price of cars was discounted between five and 10 per cent as dealers competed with each other, and that prices continued to slide into 2017.
Car loans and financing are now available below 7 per cent.
LaCroix said banks were just realising that high loan rates would not generate a lot of business. "We are getting to rates which are reasonable, which we are quite grateful for," he said.
At JN Bank, Saniah Spencer, acting chief, marketing and brand management, did not specify the size of its motor loans, even while noting that its increase over last year was "significant", but said lending rates are as low as 7.99 per cent, with 100 per cent financing.
The bank has engaged in special promotions to ensure take-up of their financing offer, which includes a discount on insurance through sister company JN General.
At FirstCaribbean Jamaica, "rates continue to decline, based on market conditions," the bank said. Its personal loans, that includes motor vehicles, is now averaging 8 per cent to 10 per cent for personal clients and "down from the low double-digits a year ago".
FirstCaribbean said it has made financing terms easier for purchasers through a combination of longer repayment tenures, 100 per cent financing, and a revolving "easy cover" loan to cover the cost of insuring the motor vehicle, annually.
Some banks canvassed did not respond. However, Jamaica's largest bank, National Commercial Bank, is currently offering auto loans as low as 8.39 per cent, while the second largest, Scotiabank Jamaica, is offering rates as low as 7.99 per cent, according to their websites.
Simpson Finance, a financing operation linked to Stewart's Automotive, which is currently advertising loan rates below seven per cent, declined to be interviewed.