USED car dealers all over the country are feeling the strain of Bank Negara's responsible lending guidelines, which is already having a big impact on the local automotive sector.
Source from (The Star Online): http://biz.thestar.com.my/news/story.asp?file=/2012/5/12/business/10960584&sec=business
Published: May 13, 2012
A Kuala Lumpur-based used car dealer said the added documentation process under the new lending rules is prolonging the car-buying procedure.
“Since the guidelines were implemented this year, the used car business has been slow. It has not been easy,” he says, adding that other used car dealers that he knew also say they are “feeling the pinch.”
“I asked some of my dealer-friends and they said they are having difficulty selling.”
Peng, a Petaling Jaya-based used car dealer says the central bank's new lending rules are making it difficult for customers to get their loans approved.
“Some of our customers are earning well but some of them have other commitments like a housing loan. Because of this, they have problems getting approval for a car loan,” she says.
Under Bank Negara's new responsible lending guidelines, which was implemented on Jan 1, loans are now approved based on net income compared with gross income previously.
The new guidelines are intended to help manage the household debt in Malaysia to reasonable levels. However, the new stringent rules have resulted in some potential car buyers finding it more difficult to get their loans approved.
In a statement last month, Bank Negara defended the new lending rules, claiming that the guidelines are meant to avoid the excessive accumulation of household debt, particularly among households that are more vulnerable to income shocks.
A Kuala Lumpur-based used car dealer selling high-end vehicles says his business is also affected.
“All of the dealers are affected, not just the low-end segment. Previously, loans allowed for two-door sports cars were between 85% and 90%. Now it's between 50% and 60%. It's because the NPLs (non-performing loans) have been high.
“I understand the need to curb the NPL, but unfortunately it's affecting the used car dealers quite a bit. The loan-approval process is taking a longer time now,” he says.
Butterworth-based Keat Hoe Used Car Enterprise Sdn Bhd says the new lending rules have had an impact on its business.
“The issue is actually with the loan financing process, not the customer,” says a sales representative who requested anonymity.
“They have the ability to pay their loans, just that they cannot be approved. The process is much more stringent now.”
He says the rules have an impact on all vehicle makes.
“It's all the same. Proton also cannot, (Toyota) Vios also cannot (get loans approved). For instance, we have an owner earning over RM3,000, but he's buying a house so can't get his financing sorted with the banks,” says the used car dealer.
CMT Sdn Bhd, a Temerloh-based used car company, claims that because many of the buyers within the area are agriculture workers, the loan approval procedure has become difficult under the new guidelines.
“Temerloh relies quite a bit of its income on agriculture. As such, many of the workers here are small-time businessmen and their salaries are not fixed. So providing a steady salary slip is an issue.”
A Sarawak-based used car dealer also concurs that the documentation process has become increasingly difficult for buyers to get their loans approved.
“We have one or two returning customers with a good track record and have no issues paying their monthly loans previously. But under the new guidelines, they can't get a loan.
Improving conditions?
A Selangor-based used car dealer however says the lending rules do “create issues” initially.
“We had problems initially but now our sales representatives are starting to adapt to the documentation process. It's not like how it was prior to the lending rules, but it is better than how it was in the first two months of the year.”
Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor says “things have been improving.”
“When the guidelines kicked in, there was a bit of a problem but it's improving. We see it getting better as time goes on,” he says.
An analyst from a bank-backed brokerage believes the lending rules will normalise eventually.
“The dip in sales earlier this year is due to the initial shock created from the lending guidelines. It will take time to adjust, but we believe things will go back to normal eventually,” he says.
As for new vehicle registrations, the lending guidelines has had a direct impact especially on sellers of lower capacity passenger vehicles, such as Proton and Perodua.
In March, Perodua announced that its vehicles fell 11% in March to 16,000 vehicles versus 18,000 units in the previous corresponding period, while the Proton Edar Dealers Association Malaysia said that loan approval rates had been affected.
According to the Malaysian Automotive Association (MAA), total vehicle sales shrank 15.3% to 53,583 units in March from a year ago. Sales in the first quarter dipped 12.6% to 138,544 vehicles from 158,432 units in the previous corresponding period.
Despite a dip in total industry volume in the first quarter of this year versus the previous corresponding period, demand for premium cars remains positive. Mercedes-Benz Malaysia grew its total vehicle sales by 0.5% in the first quarter ended March 31, delivering 1,724 units of passenger and commercial vehicles combined.
BMW Group Malaysia's total vehicle sales grew 16% to 1,516 units in the first quarter ended March 31, marking a new record high for the premium car company.
The MAA has forecast total vehicle sales to grow 2.5% to 615,000 units this year. If achieved, it will be a new record for Malaysia.
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