Financing the auto sales recovery – Manila Bulletin
In 2020, the automotive market all but collapsed as a result of the COVID pandemic. The demand for vehicles disappeared due to the uncertainties of the times and the strict mobility lockdown. Another factor, however, that had a significant impact on the auto market was the crackdown by banks and finance companies on consumer lending, especially on durable goods like motor vehicles. Virtually overnight, the taps on new car financing dried up as banks – rightly so – rushed to mitigate the risk of default.
In fact, it was commonly believed that there could be no recovery in vehicle sales without a return of auto loans. Before COVID, the majority of auto purchases were done through financing. This is why an easing of credit was seen as 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 height of the pandemic due to the active support of its captive finance company, Toyota Financial Services Philippines (TFSPH). Fortunately, Toyota already had a strong value chain in place to support its auto sales through good times and bad. Amid the shutdown in economic activity and the withdrawal of banks from consumer lending, TFSPH has kept its doors open, continuing to provide loans to buyers of Toyota vehicles. This was a distinct and significant advancement for Toyota over other automakers.
After nearly two years of battling the pandemic, the economy is finally reopening and consumer demand is returning. Auto sales in 2021 were less than 70% of 2019 pre-COVID levels. Banks are starting to show signs of willingness to take out consumer loans, including for motor vehicles. This will certainly allow the expected increase in consumer confidence and the rise in demand for automobiles.
TFSP is gearing up for what Toyota Motor Philippines Corporation (TMP) sees as sales returning to 2019 levels. TMP started the year with the introduction of a new mainstream model – the Toyota Raize. This model competes in the entry-level SUV segment which relies heavily on auto financing. TMP also recently announced that other new models are in the works. As such, TFSPH is preparing to respond to this expected increase in loan applicants.
To better serve auto loan growth, TFSPH is looking beyond its traditional direct financing loans. During the COVID-induced lull in auto sales, TFSPH has taken the opportunity to innovate and introduce new product packages aimed at making motor vehicle purchases more manageable for buyers. In particular, TFSPH has set itself the goal of intensifying its rental service offerings.
Last year, TFSPH launched its KINTO One car leasing service. It’s a full-service lease agreement that takes much of the pain out of buying and owning a car. TFSPH has made the application process so easy for interested buyers.
Applying for a lease is hassle-free since KINTO One has gotten rid of the usual guarantor or co-maker required by regular financing plans. With KINTO One, all you need is a valid driver’s license, major credit card, proof of income, and proof of billing.
One of the many concerns of a typical car buyer is the upfront payment. With KINTO One, the initial withdrawal is only the security deposit which is equivalent to the two months rental. This security deposit will be returned at the end of the plan, if the mileage and vehicle condition requirements under the rental terms are met and there are no other violations. Buyers can visit the TFSPH website to choose the car they want and even the lease term and mileage limits. You can submit your application, check the status of your application, make payment and track the release of your vehicle, all online.
KINTO One’s monthly rental rates already include regular car ownership expenses such as registration, insurance and periodic maintenance. KINTO One even makes things easier by managing the scheduling of service appointments at your favorite Toyota dealership and also renewing your registration. TFSPH created the Kinto Concierge Service to provide these additional conveniences to shoppers.
But the best part of KINTO One is that when the lease term ends, the car owner can simply take the vehicle back to the Toyota dealership, apply for a new lease, and hit the road again with a brand new Toyota car.
I have always wondered why leasing has not gained popularity in the Philippines despite its obvious advantages. In the United States or Australia, virtually all vehicle sales are done through leasing. Maybe renting will be part of our new normal.
Automotive financing is crucial for the recovery of the automotive industry. I believe, however, that leasing will lead to sustainable growth.
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