The massive job losses and fallout from the collapse of the alternative investment schemes still account for many Jamaicans not being able to pay their bills. One symptom of this is the impossibility of keeping up with their auto loan payments.

Speaking with Caribbean Business Report, Adam Harris Consumer Portfolio Manager- Retail Banking Division of The National Commercial Bank, (NCB) said:”As expected, the recession has resulted in an increase in the number of car repossessions being carried out by banks, but this has not been at an alarming level as we continue to be proactive with our loan delinquency management programme,”

Harris says the 2009/2010 fallout has been the most common reason given by clients who have not been able to honour their loan obligations. He said that as a result, the bank has had clients either return vehicles to them, or been required to repossess others. A cursory glance at the cost of car repayments for some of the latest models reveal why repossessions have become necessary.

Deals on wheels?

The NCB Automobile Loan offers you an interest rate of 19.75 per cent, up to 7 years to repay and insurance premium financing for the first year of the loan.

ScotiaWheels, the auto loan offered by Scotiabank offers the same interest rate and repayment period, along with the possibility of up to 95 per cent financing and $10,000 cash back for gas.

It is suggested that with 7 years to repay, the monthly repayments should be manageable. However consider purchasing a 2010 Toyota Corolla, fully loaded, at $3.5 million. Your monthly repayment over the 7 year/84 month period, assuming 100 per cent financing would be $77,195.69. The lower end 2010 Toyota Corolla valued at $2.76 million would require repayments of $60,897.90 monthly for 84 months at the rate of 19.75 per cent. This is also assuming that the full cost of the vehicle would be covered by the loan. At 95 per cent financing the high end model would require $73,335.91 per month, while the low end model would set one back $57,830.60 monthly.

The cost for a 5 series BMW, valued at $7.58 million at a similar interest rate and over the same 7 year period, would cost $167,183.82 in monthly repayments for 100 per cent financing and $158,824.63 at 95 per cent financing.

While the most common models to be repossessed are also the most prevalent, Toyota, Honda and Nissan, high end models such as BMWs are also on the repo list.

“The majority of the vehicles are on display at authorised used car brokers or dealers with whom we have written agreements regarding the storage of repossessed vehicles,” Harris said.

One such dealer is Mack D’s located on Old Hope Road. The section on the left of the lot displays the number and variety of cars, SUVs and trucks which the banks have repossessed and now have available for sale.

It is a motley variety ranging from the cheapest models to high end varieties such as BMWs and Mercedes Benz, from the 1990s to 2009 models.

The repossessed vehicles are “sold on the open market via competitive bidding”, according to Harris.

The repossession process begins when the initial buyer of the car defaults on loan payments or can’t get to an agreement with the bank on repayment. The car is then repossessed by the bank, which then auctions it off online, through dealerships, or sells it to local auto brokers. However, Harris says owners experiencing difficulty making payments can avoid repossession by contacting the bank.

“We actively encourage our customers to come in and talk to us if they are experiencing financial difficulties because we are here to help. Several loan customers have accessed debt consolidation and/or re-financing options that we work with them to structure to a more manageable repayment amount. This is done on a case-by-case basis,” he said.

Barring that, there may be hope for recovery of the repossessed vehicle if it is not already sold to a second buyer and the outstanding sums have been paid up to the bank. Harris says in such a case “further discussions with all the parties involved would be required.”

But he urges customers to be proactive in the case of the risk of default.

“Come in and talk to us at the first sign of difficulty. Don’t wait until the loan goes bad,” Harris said.

Used car dealers find the going tough

The job loss and other economic factors have also affected those who sell cars. Dealers in used cars are also feeling the effects of the shrinking purchasing power of the consumers who can no longer afford to purchase vehicles. This too has been reflected in the demand for motor vehicle loans.

“Traditionally, motor vehicle loan demand has a direct positive correlation with motor vehicle sales,” Harris said.

“As a result, we have seen reduced motor vehicle loan demand. However, this has happened primarily in the Consumer Motor Vehicle Loan category. Our Commercial Motor Vehicle Loan category continues to experience growth in the number of loans being booked.”

Commercial Motor Vehicles are those that are typically used in the productive or business sector.

Additionally, as a result of this economic crisis, the number of repossessed cars for sale has thrived. Many dealers and individuals are buying used cars for up to half their price, benefiting from the fact that many cannot keep up with auto loan payments.

Persons wishing to take advantage of the reduced cost of repossessed vehicles can visit the bank, fill out a form and make a bid on the vehicle, once identified. One can start bidding on a 2009 SUV valued at $6.4 million for as low as $3 million one broker said.

Bids are closed so no one but the bank and yourself will know how much you actually paid for the repo.

Car marts, such as Mack D’s also sell repossessed vehicles, but do so at current market value, based on the year and condition of the vehicle, among other factors. There, you will be required to deposit 50 per cent of the cost of the vehicle and have a 2 year repayment period for the remainder, or 25 per cent with 5 years to repay at an interest rate determined during the deal.