Tisco slows lending for used-car purchases

Tisco Financial Group is going slow in financing the purchase of used vehicles as the market situation has changed, with defaults on the rise.

Group chief executive Oranuch Apisaksirikul said yesterday that the firm saw the need for caution at the end of last year as the prices of used cars fell because of the government’s tax-incentive scheme to help people by their first new vehicle. Some existing borrowers suspended instalment payments, she said.

The group earlier launched soft measures to tackle the expected rise in non-performing use-car loans. 

The rate of NPLs climbed to 1.45 per cent in the second quarter of this year from 1.28 per cent in the first quarter and 1.2 per cent from the fourth quarter of 2012.

She said the group decided to launch serious measures by reducing lending for used-car purchases and extending instalment terms case by case. Suthas Ruangmanamongkol, president of Tisco Bank, said it now generally required down payments of 20 per cent for used-car purchases, up from 10 per cent, especially for passenger vehicles. Most used pickup trucks are used for commercial purposes, so the risk is lower. 

He explained that the prices of used passenger cars became unattractive because those taking advantage of the government programme could claim tax refunds of Bt100,000 on the purchase of a new vehicle.  

Oranuch said the group acknowledged that controlling NPLs took time, and the rate could expand by 3 basis points to 1.5 per cent by the end of this year from end-2012.

The current NPL situation was driven by unpaid instalments by used-car purchasers and losses from the repossessed-car inventory, as the group is not hurrying to sell these vehicles as it does not want to be hit too hard by the decline in used-car prices.

She said Tisco believed the situation would improve in the fourth quarter.

Used-car loans currently account for 20 per cent, or Bt26.63 billion, of its auto-loan portfolio of Bt183.14 billion. Even though the group has tapered off lending for the used-car market, this proportion is unchanged, she said.

The NPLs have not affected the group’s bottom line as it has excess reserves of Bt2.3 billion.

The group chief said loan growth this year would be able to achieve the target of 20 per cent after recording a rate of 13 per cent for the first six months. 

Vehicle sales are expected to recover in the fourth quarter, stimulated by the Bangkok Motor Show. 

Hire-purchase (lease to own) is Tisco’s majority loan portfolio at 65 per cent, with the rest consisting of business loans.