Shirajiv Sirimane and Fizel Jabir (business@dailynews.lk)
Mixed sentiments have been expressed by the motor industry with regard to Central Bank’s decision to introduce an upper limit of 70% on the price of a vehicle that can be financed by non-bank lenders.
The decision applies to all types of vehicles including motor bicycles and three wheelers.
Vehicle Importers Association of Sri Lanka (VIAL) Secretary Keethi Gunawardena said the Central Bank’s decision to bar commercial banks and finance companies granting loans and leases in excess of 70 percent on the vehicle value will have an adverse effect on the vehicle market in a backdrop of the rupee depreciating in an unprecedented manner.
He said with the US Dollar and the JapaneseYen appreciating, the prices of vehicles have already shot up by Rs125,000 to 550,000.
In such a context the Association is very much concerned about the move to impose a taboo on granting loans and finances with regard to vehicle purchase, he said.
Gunawardena said this move will very negatively affect people who have newly embarked on a career and were looking at purchasing their first car as they don’t have cash reserves. VIAL is therefore very concerned above this move, Gunawardena added.
The Central Bank directed finance companies not to give any vehicle loan amounting to more than 70 percent of (loan to value ratio) of the price of a vehicle from September 15.
Automotive Valuers Association of Lanka Secretary and CareDrive Motor Engineers Managing Director Isuru Senaratne said that this has both negative and positive sentiments. “Firstly as expected this will reduce the import of vehicles and leading to the balance of payments crisis and towards the stabilization of the rupee triggered by high imports.”
He said that this may not have a big impact for banks involved in leasing. “However it would definitely have an impact on the leasing companies as they usually provide almost 99% of a value of a vehicle to a customer as against the bank’s 70%.”
This will increase cash flow due to the 30% contribution from the buyer for the purchasing price. “Finance companies’ business strategy is to go for high exposure against the market value justifying credibility of a potential customer.”
“What will happen is that people will opt for small cars (less than Rs. 2 million). In addition people will also go for personal loans.
An official from a leading finance company said that today over 60% of vehicles are sold on lease. “This will definitely have a negative impact on our bottom line.”
An official from the Central Bank said that the idea was to have stable market in the industry where defaulters will minimize to a greater extent.
www.dailynews.lk
Mixed sentiments have been expressed by the motor industry with regard to Central Bank’s decision to introduce an upper limit of 70% on the price of a vehicle that can be financed by non-bank lenders.
The decision applies to all types of vehicles including motor bicycles and three wheelers.
Vehicle Importers Association of Sri Lanka (VIAL) Secretary Keethi Gunawardena said the Central Bank’s decision to bar commercial banks and finance companies granting loans and leases in excess of 70 percent on the vehicle value will have an adverse effect on the vehicle market in a backdrop of the rupee depreciating in an unprecedented manner.
He said with the US Dollar and the JapaneseYen appreciating, the prices of vehicles have already shot up by Rs125,000 to 550,000.
In such a context the Association is very much concerned about the move to impose a taboo on granting loans and finances with regard to vehicle purchase, he said.
Gunawardena said this move will very negatively affect people who have newly embarked on a career and were looking at purchasing their first car as they don’t have cash reserves. VIAL is therefore very concerned above this move, Gunawardena added.
The Central Bank directed finance companies not to give any vehicle loan amounting to more than 70 percent of (loan to value ratio) of the price of a vehicle from September 15.
Automotive Valuers Association of Lanka Secretary and CareDrive Motor Engineers Managing Director Isuru Senaratne said that this has both negative and positive sentiments. “Firstly as expected this will reduce the import of vehicles and leading to the balance of payments crisis and towards the stabilization of the rupee triggered by high imports.”
He said that this may not have a big impact for banks involved in leasing. “However it would definitely have an impact on the leasing companies as they usually provide almost 99% of a value of a vehicle to a customer as against the bank’s 70%.”
This will increase cash flow due to the 30% contribution from the buyer for the purchasing price. “Finance companies’ business strategy is to go for high exposure against the market value justifying credibility of a potential customer.”
“What will happen is that people will opt for small cars (less than Rs. 2 million). In addition people will also go for personal loans.
An official from a leading finance company said that today over 60% of vehicles are sold on lease. “This will definitely have a negative impact on our bottom line.”
An official from the Central Bank said that the idea was to have stable market in the industry where defaulters will minimize to a greater extent.
www.dailynews.lk
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