First-Car Scheme May Boost Loans Past Bt900Bn: Thai Govt Incentive

[webfact]

GOVERNMENT INCENTIVE

First-car scheme may boost loans past Bt900 bn in 2012

By Sucheera Pinijparakarn

The Nation

Programme could push sales of vehicles to 1 million units; hire-purchase firms face risks

The Thai Hire Purchase Association expects the government's first-car programme will boost auto loans next year over Bt900 billion, up from the Bt630 billion expected this year.

The association has forecast that demand for car loans next year would reach Bt830 billion based on estimated auto sales of 980,000 units. However, the first-car scheme, which is expected to go before the Cabinet for approval today could push auto sales next year to 1 million units, with a consequent increase in demand for loans.

Chairman Isara Wongrung said the Excise Department last week called a meeting with the association on the initiative, which would assist consumers buying their first car.

As currently proposed, the price of a car purchased under the programme should not exceed Bt1 million, a feasible level for lower-income buyers. For more expensive cars, they might be unable to pay their debts, increasing the problem of non-performing loans.

Isara said that on a car costing Bt1 million, if 80 per cent of the purchase price is financed by a loan with a term of 60 months, the buyer must pay a monthly instalment of Bt10,000, for which he or she should have a minimum monthly salary of Bt25,000. If the car costs Bt500,000, the buyer would need a minimum monthly salary of Bt15,000 to pay instalments of Bt8,000.

He said hire-purchase operators should be aware of the risks inherent in this programme, as the incomes of buyers included in it will not be high. However, if the project is effective, the number of auto loans will rise because most of these first-time car buyers will use hire-purchase.

He said Kasikorn Research Centre had projected auto sales this year at 900,000 units, with auto loans reaching Bt630 billion, an increase of 28 per cent over last year. Without the first-car project, the research house expected auto sales next year to increase to 980,000 and auto loans to Bt830 billion.

But with the programme, car sales next year will likely reach 1 million units and auto loans soar to Bt900 billion, he said.

Isara, who is also managing director of Kasikorn Leasing, said his company had not included the first-car project in its 2012 business plan, which calls for K-Leasing projects to grow more than 30 per cent.

He added that the company might offer campaigns under the project because it was concerned about the NPL risk.

Thanachart Bank, the leader in the hire-purchase market, last week brainstormed on strategy after learning the project was to be effective in the fourth quarter of this year. Praphan Anupongongarch, executive vice president, said the bank believed the project would boost demand for auto loans, and it planned to offer to serve buyers who join the scheme.

Ayudhya Capital Auto Lease, or Krungsri Auto, is confident it will benefit from the programme, especially for pickups, which account for 55 per cent of its portfolio.

Pairote Cheunkrut, managing director of Krungsri Auto, said the company would talk with dealers on jointly offering special campaigns to buyers, which could entail longer payment periods. However, he said hire-purchase loans might see only single-digit growth because the programme limits the car price to Bt1 million.

If the project starts in the fourth quarter, Krungsri might raise its hire-purchase target for this year above the current figure of Bt150 billion.

Chalit Silpsrikul, executive vice president of Tisco Bank, said the bank would have to wait to see the details on the first-car project, but it would probably benefit auto sales and consequently the hire-purchase market.

Currently, 70 per cent of Tisco Bank's outstanding auto loans of Bt137 billion are for pickups, and the rest for passenger cars.

-- The Nation 2011-09-12

[ricku]

What this country needs is less cars, not more cars. (Especially in BKK).

Seriously, I know many people who drive their car to work, even though their office is only 2 blocks away.

There are many who drive to their work, even tho BTS would be alot quicker.

Edited September 12, 2011 by ricku

[Ricardo]

Loans likely to reach a record-high. And the good news is ?

[aussiebebe]

As currently proposed, the price of a car purchased under the programme should not exceed Bt1 million, a feasible level for lower-income buyers.

It would be far smarter if the government somehow linked this 'first-car' program with it's energy policy. It would be better if only lesser polluting cars were offered like eco-cars or CNG-fitted ones. I live in Bangkok, so I understand how crucial cars are to Thais in terms of status; the bigger, flashier the better, it seems, but encouraging lower-income earners to buy cars up to 1mtb is worrying. Paying off the loan over 6 years seems to be the only financial concern, running costs aren't even factored in.

[rheinwiese]

Hmmm, 15k salary/month, installment 8k……

Plus gas, (1000km/month=3500 Baht, insurance (1.500 baht/month,) service, repair and maintance (1.000 Baht/monthly) loss of value (2.000 Baht/month.

So what are the proud owners of the cars are going to eat, drink and where are the going to stay???

[siampolee]

Classic case with my young brother in law despite my wife giving him advice as well as me. His wife has got to have a big face, wouldn't contemplate a ute ( pickup)

Salary 20,000 baht a month, rent and bills 3,000 baht a month, day to day living expenses around 7,000 baht a month. Car repayments 9,000 baht a month.

Total outgoing per month, 19,000 baht a month.

Nary a consideration about, fuel, servicing costs wear and tear insurance, yearly licence.

They borrowed from his mother in law to fund the deposit for car at lowest rate 40,000 baht, payments over 5 years.

Now he comes to us for help, my wife refused. Now brother in law is trying to either get someone to take the car on and make the car payments,he is also trying to sell the car.

He couldn't afford to go to join the family at Songkran so his wife borrowed money from her mum (10,000 baht) so as to be able to visit both sets of parents,

How many more gullible fools are going to be in this sort of mes as a result of this inane scheme?

[otherstuff1957]

Start saving up now.... there will be lots of repo'd cars on the market in a year or so. Cash buyers will be able to snap them up and make a tidy profit reselling them.

I wonder how many PTP politicians have invested in rice, second-hand car lots, etc... recently?

[Buchholz]

As currently proposed, the price of a car purchased under the programme should not exceed Bt1 million, a feasible level for lower-income buyers.

This is part of Thaksin's, "Everyone will be rich in 6 months" program...

as the definition for lower-income is now determined to be...

the buyer must pay a monthly installment of Bt10,000, for which he or she should have a minimum monthly salary of Bt25,000.

[kamluan]

Hmmm, 15k salary/month, installment 8k……

Plus gas, (1000km/month=3500 Baht, insurance (1.500 baht/month,) service, repair and maintance (1.000 Baht/monthly) loss of value (2.000 Baht/month.

So what are the proud owners of the cars are going to eat, drink and where are the going to stay???

eat=whit our 300 bath extra...

Drink=at the temples you can always get water for free..

Stay=in my new zero financied car of course....

hahahahahhaha

[rogerdee123]

I recall that in the previous Thaksin Administration a similar scheme, i.e. easy credit and small down pymt for car purchase. There were articles in local newspapers about people who couldn't afford the monthly pymts were buying cars. One particular article was about a crisis among school teachers who seem to have been targeted as a group by aggressive car salesmen. After a few months of skimping on food and other necessities in order to make their car payments, they could no longer make the pymts and came under great personal pressure.

THis easy credit policy sounds like the US before the big financial meltdown in 2008 ... i.e. credit was made too easy and banks ended up with non-performing loans ... which caused the banking crisis .... etc etc etc ....

Sure ... the car industry will be booming and this will appear like a terrific idea ..... for a short time ...... until reality and the "cause & effect" sets in.

Easy credit does not create wealth unless it's used for PRODUCTIVE activities. In all other case, easy credit only produces debt, which takes money out of the economy.

Although the car companies probably love him, I think Thaksin's economic ideas are poorly thought out and mostly smoke and mirrors.

[siampolee]

Interesting to note that on the stock market today shares in both the automotive manufacturing sector and the banking sector have been the prime target of buyers.

Seems as if those with the money are buying into the above sectors as they see those with little money will be exposing themselves to further debt.

The poor who can ill afford new cars are indeed going to be contributing to the coffers of the already, ample rich by virtue of the share income in the above sectors.

All will be well until the defaults start , then who is going to be picking up the bill ?

[elgato]

A BIG shovel to be given to each new car buyer in the program to dig themselves a little deeper