Bank to raise contribution from auto cash loans

Tisco Auto Cash currently ac-counts for between 5 and 6 per cent of the portfolio.
Tisco Bank executive vice president Chalit Silpsrikul yesterday said that the fierce competition in auto loans had convinced several lenders to focus more on higher-margin business such as cars-for-cash products.
Financial houses used to enjoy a higher margin from providing loans for purchases of used and seized vehicles, but banks today face higher credit costs because of the lower price of such vehicles, he said.
The government’s first-car scheme has influenced used-car prices, which have dropped by 10 per cent since the programme was started. The used passenger-car market in Bangkok has been affected the most, with more city dwellers now preferring to buy a new car, he said.
However, demand for used pick-ups in the provinces remains solid, and Tisco has therefore placed more emphasis on the provincial market.
The expected lower profit from used and seized cars is expected to be seen most markedly next year, because hire-purchase firms will then realise the full impact of the first-car scheme on the used-car situation, he added.
Chalit, who is also vice president of the Thai Hire Purchase Asso-|ciation, said he expected all auto lenders to aggressively promote cars-for-cash products.
Some banks are developing such a product into their portfolio.
Tisco Bank will strongly promote Tisco Auto Cash next year, including the use of television advertising, because the segment is not as well known in the market as traditional hire-purchase products, he said.
Although the bank has had Tisco Auto Cash in its portfolio for a number of years, the level of lending via the product is still lower than expected, he added.
Outstanding Tisco Auto Cash lending stands at Bt10 billion out of an overall auto loan portfolio of Bt160 billion-Bt170 billion.
Pairote Cheunkrutroj, managing director of Krungsri Auto, said lenders had room to grow from cars-for-cash lending, because the market is large and consumers are becoming increasingly familiar with such products.
At Krungsri Auto, it is possible that the cars-for-cash proportion will soon exceed the company’s used-car loans.
Loans for new vehicles represent 50 per cent of the portfolio, while used-car loans and cars-for-cash lending each contribute 23 per cent. The remainder comes from motorcycle loans.
Krungsri Auto expects its outstanding loans this year will grow by 28 per cent to Bt193 billion.