Sunday, November 27, 2005
Automobile Special: 50% cars being bought through leasing firms
By Imran Ayub
KARACHI: Leasing facilities by over two dozen companies have given a real boost to car sales during the last one and a half year as operators say now more than 50 percent vehicles are being sold through leasing finance.
The leasing companies believe the trend is likely to continue in the days to come on the back of increasing demand and rising production coupled with eased car import regime offered by the government. "Safely you can count our (leasing companies) share at more than 50 percent," said Bashir Chaudary, president of the Leasing Association of Pakistan. "Our services are getting popular with each passing day and for car financing people look first towards leasing companies than any other organisation."
He said now 26 leasing and modaraba companies were offering leasing facilities across the country, but getting the major share in Karachi, Lahore and Islamabad, depending on the population of the cities.
Production and sales of cars surged by 26 percent and 23 percent, respectively, during the first four months of the current fiscal compared with the same period of 2004-005. The latest figures show the trend, which suggests consumers prefer locally assembled cars despite rising imports of used and new cars since June 2004, when the government liberalised the import regime to some extent.
The financing trend has also benefited the dealers, who say they are now less bothered about the payments as the leasing facility allows payments from the financing institution rather than by buyer themselves.
"Now the situation is that authorised car dealers discourage bookings on cash basis and prefer orders by corporate, multinationals, leasing companies and banks," said Kamran Ali Khan, a dealer of an old and new car showroom on Share Faisal.
He said the on one hand it proved beneficial to the dealers but also for the people belonging to middle class, who got an opportunity to enjoy driving experience.
Over two dozens leasing companies, however, face competition from banks which offer financing comparatively on lower margins.
"Obviously, they have some lower rates, but it is not threat as such for us," Mr Chaudhry of the Leasing Association of Pakistan said. "The leasing companies are operating with good business generation and healthy response mainly from the middle class."
He said the leasing companies had better recovery rate than banks as the regulations allowed them to repossess cars if customers fail to make timely payments.
However, consumers believe buyers of locally assembled cars have had to put up with a series of tactics by car manufacturers and dealers aimed at extracting more money from them than the stated price of the car.
Recently, they claim, banks and leasing companies have also joined in this exploitation spree by increasing the interest rate or mark-up on car loans for their existing clients.
http://www.dailytimes.com.pk/default.asp?page=2005%5C11%5C27%5Cstory_27-11-2005_pg5_7