PROTON EDAR DEALERS ASSOCIATION MALAYSIA
“INTEREST RATE CUT MAY REDUCE PROTON CAR SALES”.
NOVEMBER 2008, KUALA LUMPUR. Proton car sales may drop instead of increase with the downward revision in the Bank’s lending and base financing rates” said Armin Baniaz Pahamin, Deputy President, Proton Edar Dealers Association Malaysia. The current downward revision in interest rate is negligible and unless the interest rate cut is substantial, the revision may signal more possible interest rate cut in the near future and only trigger a ‘wait-and-see’ reaction from the public for further interest rate cut. This will affect our car sales. Bank Negara should study carefully the quantum of reduction and regulate to reduce the effective interest rate once but substantially rather than progressively over a period. This will eliminate the wait-and-see factor and promote immediate spending.
Proton car sale is not interest rate dependant and neither does Perodua car sales. Perodua car has always been sold at a slightly higher interest rate compared to other models and it is not a mitigating factor for the customer. A cheaper loan is an attraction but what is more important is the approval for the customer’s hire purchase loan. The approval of customer’s hire purchase loan depends on the Bank risk scoring. Proton customer risk profile are set by the Bank and is higher compare to other car distributors making it harder for Proton customer loan to be approved. For example, there have been various instances that our customers loan were rejected or reduced but the same customer were able to secure a higher loan to buy example, a Toyota. Currently, customers who do not fulfil or satisfy the Banks risk profile are given an option for a higher interest and lower margin of finance or risk the loan being rejected. Unless the risk profile issue is addressed, even with the cut in interest rate, Proton car sales will be quite stagnant if not lower.
An ‘Easier’ loan approval will promote a healthier car sales rather than a ‘cheaper loan’. A cheaper loan will not create additional sales but is a bonus for potential customers as hire-purchase loan is fixed throughout the tenure of the loan. The cheaper loan should not be at the expense of an easier loan approval. In addition to the cheaper loan, Banks should also provide a more flexible package for hire purchase financing.
A cheaper source of financing will however cushion Proton Dealers from the rising cost of operation. Almost 90% of Proton dealers operate on bank facilities and a cut in banking facilities rate of interest will enable the dealers to offset the saving against the increased in overhead expenses such as utility bills as well as petrol. On the average, every dealer is holding at least 20-30 cars for immediate deliveries. These cars have to be transported from proton stockyard, to our stockyard and deliver to customers with at least half petrol tank filled. All these extra cost is at the expense of individual dealers.