Car loans still fetching low rates

Senior bankers and car dealers are partnering to hook clients with low introductory rates on financing for auto purchases, the cheapest of which was a 2.2 per cent loan deal.

The low price attached to that loan, however, will last for just one year. It’s an arrangement between Nissan dealer Fidelity Motors, which wants to sell more vehicles amid a market downturn, and JMMB Bank, which wants to write more loans.

The introductory rate, which was on offer up to August 31, will last for a year, after which the car purchaser will pay a rate of 6.75 per cent to service the loan.

JMMB Bank will lose nothing from the deal, which relates only to purchases of Nissan X-Trail vehicles. For that first year, while car buyer gets a bargain rate of 2.2 per cent, Fidelity Motors will cover the differential between that and the regular rate charged by the bank.

“The conditions are financially feasible to both institutions,” said Moya Leiba-Barnes, general manager for client partnership at JMMB Bank. “Fidelity Motors will pay the interest rate difference between the discounted rate offered by JMMB Bank, for one year, as part of this promotion. The loan is for a 10-year tenure,” Leiba-Barnes said.

Fidelity did not respond to requests for comment up to press time.

The car market has softened throughout the pandemic, amid job losses and salary cuts that left consumers with less disposable income.

Motor vehicle imports dropped by 10 per cent in 2020 to about 50,400 units from 56,110 in 2019, according to official statistics from the Trade Board, which doles out export and import permits. Correspondingly, the value of auto imports fell to US$446.5 million from US$601 million.

Based on their published rates online, the largest banks offer car loans at roughly the same rates, including: National Commercial Bank, 6.85 per cent; Scotiabank Jamaica, 8.29 per cent; and JN Bank, 6.5 per cent to 8.0 per cent. Such rates are cheaper than overall pool of consumer or personal loans, which is priced around 20 per cent on average, according to the most recent Bank of Jamaica data on interest rates.

The JMMB Bank deal isn’t the first of such promotions but its among the lowest rates ever seen. Back in 2016, for example, ATL Automotive in conjunction with First Global Bank offered payment holidays for its customers for six months to 2017 on several of its models. At around the same time, Magna Motors, the dealership for Hyundai, partnered with NCB on a promotion that cut interest rates to six per cent for at least the first year of the loan.

Car sales dropped during the onset of the pandemic in 2020, but there has been an uptick in business since the end of the year, and is expected to continue on an upward trajectory given the ongoing economic recovery, Leiba-Barnes noted with caution.“Of course, even though the economy has shown signs of improvement, uncertainty still persists, especially as we remain challenged by the new COVID-19 variants and vaccination rates continue to be low,” she said.

The Jamaica economy grew 12.9 per cent in the June quarter, and 2.3 per cent in the first half of the year, relative to the comparative periods in 2020. April-June represented the fastest pace of growth for Jamaica, but was still not enough to overcome the 18 per cent contraction sustained in the same period last year.

steven.jackson@gleanerjm.com