Due to COVID-19 and record levels of unemployment, many consumers as well as businesses are tightening their belts because of the slow economy. In the Philippine automotive industry, the declining car sales are proof of this.
If you're in the market for a new car, you can still get to buy your dream ride, but the auto loan process now can be a lot more challenging than you might think.
Banks are slowing down on car loan processing. Though they still actively lend, taking out loans can take longer than usual.
Wondering why car loans are harder to get?
The straight answer is all about the new requirements. Banks have tightened standards, becoming more choosy about their borrowers and now asking a lot of questions. Car loan applications now come under deeper scrutiny and buyers have to bring more. Because of this, loan processing is taking three weeks from what used to be only a few days pre-pandemic.
The consumer side:
1. Is the applicant currently employed? Can he hold his job long enough until his loan ends? Banks have to make sure if the applicant is permanently employed. Recently because of the pandemic, the lender has to understand what the consumer’s true state of employment is and his ability to pay back a loan.
2. Is the industry he is in stable enough to withstand the impact of COVID-19? Banks are doing additional background checks if the borrower works in an industry that is not heavily impacted by the financial crisis due to the pandemic. For their part, the dealer has to pre-screen applicants so prospects can stand better chances for approval.
The business side:
3. Banks have a portfolio to protect. A bank portfolio is as good as its profile – a collection of financial investments like stocks, bonds, commodities, cash, and cash equivalents. A good bank profile should be impervious to downturns and must do well in bad times as well as good times. In other words, it won't do a bank's image any good if it can't collect loans.
In Spite of This, Now May Be a Good Time to Buy
Car dealerships are presently doing business as usual, but there are likely fewer people in the market to buy a car, especially considering that workers have become unemployed since the COVID-19 crisis began.
This lower demand means that you'll not only be more likely to find the model you want, but you may also find salespeople more motivated to negotiate on your terms to meet sales goals.
Also, due to interest rate cuts, you may be able to get a lower interest rate on your auto loan. The economic crisis caused by the pandemic has driven interest rates to rock-bottom levels and lower downpayment financing scheme, meaning there has hardly been a better time to borrow.
Note, too, that as car loan approvals are taking longer, car companies are also encouraging car purchases on cash payments by offering heavy discounts. If you have cash, today is the best time to buy. Auto delears such as Honda, Nissan, Toyota, Kia, among others, are offering huge discounts for its vehicle models of as much as P70,000.
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