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Auto lenders shifting their focus to refinancing

AUTO-LOAN refinancing has become the spotlight for hire-purchase lenders this year, as they bid to maintain growth amid a decline in new loans following a slump in the sales of new cars. Hire-purchase lenders have been designing new features for car-loan refinancing, as well as increasing their distribution channels to promote the products.

Kiatnakin Bank's auto-loan refinancing product - KK Car Cash - will be strongly promoted to retail customers through its branches and via its new strategic partner, B-Quik, a leading auto-maintenance operator, said Aphinant Klewpatinond, president and chairman of commercial banking.

The bank recently signed a three-year exclusive agreement with B-Quik in the expectation that the large number of B-Quik branches will help create brand awareness of KK Car Cash among vehicle owners who need cash.

The bank began offering auto-loan refinancing this year.

B-Quik has 102 branches in its network, while Kiatnakin Bank has 87 branches around the country.

As an auto-maintenance operator, B-Quik can assure the quality of vehicles subject to refinancing by the bank, he said, adding that Kiatnakin Bank will promote additional auto-loan products via B-Quik in the next phase of their partnership.

Meanwhile, Thanachart Bank's senior director for hire purchase, Teerachart Jirajaratporn, said the bank had been penetrating the auto-loan refinancing market for the past three years, as this type of product was low risk and generated a high yield compare with used- and new-car lending.

The bank offers auto-loan refinance to customers who used to be new-car loan customers, as it knows their backgrounds well.

Vehicle-loan refinancing totals more than Bt10 billion of the bank's auto-loan portfolio of Bt400 billion, he said.

Thanachart Bank has also soft-launched a new auto-loan refinance product called Cash Your Car Top-Up to tap customers who have nearly repaid their original vehicle loan from the bank.

Meanwhile, the bank still uses its branches as the main channel to promote auto lending and refinancing. However, it is also conducting a feasibility study of other channels in order to strengthen its products and distribution in the future, he added.

T-rathorn Thuwanontha, director and secretary-general of the Thai Hire-Purchase Association, said auto-loan refinancing was the right product for lenders to focus on amid the economic downturn and lower new-car sales.

Hire-purchase lenders are more active in this category, with several having strongly promoted car-loan refinance since the beginning of the year. This is because many people need additional cash amid the economic downturn in order to pay for seasonal purchases, such as those that need to be made ahead of the new school semester, he said.

Of the total Thai auto-lending market worth Bt700 billion, refinancing accounts for Bt70 billion-Bt100 billion, with Krungsri Auto being the market leader, followed by Thanachart Bank.

The main advantage of auto-loan refinance for consumers is the interest rate, which is better than that charged for personal loans. Car-loan refinancing attracts interest of 10 per cent per year, against more than 20 per cent for an unsecured loan, he said.

For lenders, refinancing is low risk because they know the instalment-payment background of customers, besides which it provides a high yield, he added.

T-rathorn is also an executive vice president at KTB Leasing, which this year entered the vehicle-loan refinancing segment by targeting 1,500 units per month.

Krung Thai Bank is the main channel for selling the company's refinancing offerings.


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