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Banks themselves are complicit in irresponsible car purchases

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Don’t Drink And Write

We need to sit down and talk about an ugly truth in the automotive business: Many Filipinos who “buy” cars have no business doing so. And that’s because these “buyers” really can’t afford one. They just get enticed by insanely low down payments and the moronic desire to impress or keep up with the neighbors.

As an automotive journalist, I routinely get press releases from car companies announcing attractive financing offers — companies that constantly devise new ways to outdo each other’s proposition in a desperate attempt to hit their sales quotas and dispose of their aging inventories. Meanwhile, the customers recklessly throw caution to the wind and “purchase” a brand-new vehicle even if, first, they don’t really need one, and, second, they don’t actually have the resources to finance the monthly amortization that follows a cheap down payment that’s getting lower by the day.

Heck, I once saw a mall car display with a sign that proudly said: “P1 down payment.” You read that right: one peso. Yes, these days, you could drive home a new car for practically nothing. This explains why — besides the sales promo announcements that flood my mailbox — I also receive from various car-financing banks lists of repossessed vehicles that they sell or auction off so they can get back the money they stupidly loaned to buyers who had absolutely no practical and moral right to acquire a motor vehicle in the first place.

Of course, our automatic reaction is to blame the automakers. They who behave like they’re in a selling contest and whose only concern is their monthly sales report — quality of customers be damned. But that’s already a given. It’s the job of car firms to sell, um, cars. What I can’t comprehend is how banks help and in fact enable them to create an unhealthy sales climate that is based on discounts and promos as opposed to real purchasing power. They’ll say: “Oh, never mind the incredibly low down payments; we screen car-financing applicants thoroughly.” But if that were the case, how do we then explain the inordinate number of repossessed vehicles? Because I don’t care what kind of banking logic you apply here, it tells me that people who can’t really afford a brand-new vehicle are consistently being approved for financed car purchases.

At a press conference last week for its latest car-financing deal, BPI Family Savings Bank unveiled an irresistible “all-out” promo in which certain miscellaneous fees are getting waived, including the chattel mortgage and the first-year insurance premium. A colleague beat me to a question I itched to ask: “What is the percentage of your car-financing clients who manage to successfully complete their terms?”

Honestly, I expected an answer in the high 30% or low 40% — but definitely not more than 50%. To my (and I suppose everyone’s) surprise, BPI Family’s retail lending group head Joaquin Mari B. Abola disclosed a batting average of “more than 90%.” Simply put, more than nine in every 10 car-financing clients of the bank are able to see the loan through and pay off whatever amount they borrowed so they could get their dream car.

When somebody asked: “Even those who buy cars with giveaway down payments”? I liked how the bank executive answered this: “Oh, we don’t do those kinds of deals, so we don’t really attract those kinds of buyers. It’s like a pricey café. If people know it has expensive coffee, it will attract a certain demographic of customers.”

That demographic consists of individuals who drink P100 coffee not to impress friends on social media but because they can and they really love the espresso. They don’t do so just to put on an image even if their salary doesn’t really give them the flexibility of ingesting overpriced coffee beans.

Now, I don’t know if BPI Family’s claim is accurate (it probably is), but all banks should exercise the same level of due diligence and corporate prudence in accepting car-financing applicants. It’s time we stopped the practice of dangling cheap vehicle promos before “customers” who aren’t really qualified as customers. Maybe then we’ll stop seeing cars getting repossessed. And maybe then traffic volume will ease up just a little bit.