Financing the recovery of auto sales – Manila Bulletin
In 2020, the automotive market virtually collapsed as a result of the COVID pandemic. Demand for vehicles vanished due to the uncertainties of the time and the strict lockdown on mobility. Another factor, though, that significantly impacted the auto market was the clamp down of banks and financing companies on consumer loans, especially on durables like motor vehicles. Practically overnight, the taps on new car financing dried up as banks – rightfully so –rushed to mitigate the risk of loan defaults.
In fact, it was conventional wisdom that there could not be any recovery in vehicle sales unless there was a return in auto loans. Pre-COVID, majority of automotive purchases were done through financing. That is why a loosening of credit was considered essential to a resurgence of the auto market.
As if to underscore the importance of vehicle consumer financing, Toyota was able to survive and outperform other auto brands during the peak of the pandemic due to the active support of its captive financing company, Toyota Financial Services Philippines (TFSPH).Thankfully, Toyota had already put in place a strong value chain that was aimed at sustaining its auto sales – in good and not so good times. In the midst of the shutdown in economic activity and the pull-back by banks from undertaking consumer loans, TFSPH kept their doors open, continuing to extend loans to buyers of Toyota vehicles. This was a distinct and significant leg-upfor Toyota over other car companies.
After close to two yearsof dealing with the pandemic, the economy is finally reopening and consumer demand is returning. Auto sales in 2021 were within 70 percent of the pre-COVID levels of 2019. Banks are starting to show signs of willingness to take up consumer loans, including for motor vehicles.This will definitely enable the expected increase in consumer confidence and the rise in demand for autos.
TFSP is preparing for what Toyota Motor Philippines Corporation (TMP) sees as a return of sales to 2019 levels. TMP began the year with the introduction of a new mainstream model – the Toyota Raize. This model competes in the entry level SUV segmentthat heavily relies on auto financing. TMP also recently announced that more new models are in the wings. As such, TFSPH is gearing up to meet this expected surge in loan applicants.
In order to better serve the growth in auto loans, TFSPH is looking beyond its usual straight-financing loans. During the lull in auto sales brought by COVID, TFSPH took the opportunity to innovate and introduce new product packages that are aimed at making motor vehicle purchases more manageable for buyers. In particular, TFSPH has taken aim at stepping-up its offers of leasing services.
Last year, TFSPH introduced its KINTO One car leasing service. It is a full-service-lease that takes away so much of the pain of buying and owning a car. TFSPH has made the process of application so easy for interested buyers.
Applying for a lease is made hassle-free since KINTO One has dispensed with the usual guarantor or co-maker that is required by regular financing plans. With KINTO One, all that are needed are a valid driver’s license, a major credit card, proof of income, plus proof of billing.
One of the many concerns a typical car buyer has is the up-front payout. With KINTO One, the initial cash-out is just the security deposit which is equivalent to the two months’ lease. This security deposit will be returned at the end of the plan, if mileage and vehicle condition requirements under the lease terms are met and there are no other infractions. Buyers can visit the website of TFSPH to choose the car they want and even the lease term and mileage limits. You can file your application, check the status of your application, make payment and keep track of your vehicle’s release – all online.
KINTO One monthly lease rates already include regular car ownership expenses such as registration, insurance and periodic maintenance. KINTO One even makes things more hassle-free by handling the scheduling of service appointmentsat your preferred Toyota dealer and renewing your registration, too. TFSPH established the Kinto Concierge Service to provide these added conveniences for buyers.
But the best part of KINTO One is that when the lease term ends, the car owner can just bring the vehicle back to the Toyota dealer, apply for a new lease and be on the road again with a brand-new Toyota car.
I have always wondered why leasing has not risen in popularity in the Philippines despite its obvious benefits. In the USA or Australia, practically all vehicle sales are done through leasing. Perhaps, leasing will be part of our new normal.
Auto financing is crucial to the recovery of the auto industry. I believe, though, that leasing will drive it to sustainable growth.
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