Auto credit scheme: Banks impound defaulters’ vehicles

Monday, 18 Oct 2010    


Scores of beneficiaries of auto credit scheme are losing their cars as banks repossess vehicles from loan defaulters, Punch’s RASHEED BISIRIYU reports


Many commercial banks have ordered the repossession of all new cars whose owners have failed to pay back loans taken for the purchase of the vehicles.


The recall, according to bank chiefs, is part of an aggressive loan recovery measures being adopted by most banks.


Investigation by our correspondent on Sunday showed that the repossessed vehicles were already being resold to other interested members of the public at cheaper prices.


For instance, a source at Skye Bank Plc in Lagos said five units of Honda Civic 2009 model, which were seized from some car loan defaulters had just been resold at the rate of N500,000 each.


A new Honda Civic was offered by car dealers at N4m, including bank charges, when the finance deal for new car ownership was concluded two years ago.


The source said that repossessed cars were given out at such ridiculous amount due to high cost of storage and depreciation rate.Besides, he noted, ”The bank is only interested in getting back its unpaid balance on the seized cars.”


It was also learnt that prices of any recalled cars could depend on the model of the vehicles, year of manufacture and company selling.The impounded vehicles, it was learnt, were usually parked within the bank premises where interested buyers could have access to them for inspection.


Investigation revealed that banks and leasing companies were adopting unconventional means of advertising the sale of the vehicles, which included the use of agents, mechanics and managers of filling stations.


An agent to a leasing company recently sent an email out to his friends and customers, urging them to buy any of 40 cars just repossessed by the company from their former owners who could not offset the payment.


According to him, the cars, which had covered between 6,000 miles and 35,000 miles, are available at between N1.8m and N2.8m.“Seeing these cars, you would not believe they have been used,” the man stated.


He also included the pictures of the cars with the name and email address of a contact person. Although he added that the vehicles were parked at Alausa, Ikeja, the sender of the message did not state the specific office or park where they could be found.


Details of the vehicles list showed 29 units were Honda Accord, three Volkswagen Passat, two Volkswagen Jetta, four Honda Civic, one Toyota Hiace and two Coaster buses.The registration numbers and colours of the vehicles were also given in the message. Other information disclosed for the benefit of interested buyers included the mileage, transmission system, the original cost of each vehicle and valuation percentage with recommended prices.


Dealers of used cars are said to be taking advantage of the situation, clearing many of the vehicles as soon as they got any hint that they were available.“All the five Honda Civic cars, which were parked at Skye Bank office at Ikeja, have been paid for. One car dealer paid for all the five,” said a source.


Although a top official of Skye Bank, could not confirm if the bank undertook the sale of any repossessed vehicles, he said that every bank was currently devising different aggressive strategies to recover loans, especially those considered as bad.The official, who spoke with our correspondent on the telephone on Saturday and asked not to be named, also explained that depositors‘ money was used to fund the new car credit scheme.


He added that because of that it was just proper to use all kinds of lawful means to get the money back.A manager at First Bank Plc, who did not want his name published, told our correspondent also on the telephone that the bank did not have any case of repossessed vehicles.


According to him, “We screen all applicants for loans under the car financing scheme and consider people who are working with companies with history of repayment.”The Managing Director, Hyra Motors, Mr. Seyi Oyinlola, said cars that were repossessed by any loan institutions were usually difficult to push out for sale.


He explained, “It is a long process because sometime courts are involved, not many people will want to forfeit their deposit.”Oyinlola, who also confirmed that car business had been tough in the last one year, however, said that no bank had approached his firm for resale of any repossessed cars.


The General Manager, BriscoeFord, Mr. Oseme Oigiagbe, said withdrawal of vehicles from owners who failed to comply with the loan repayment terms was a regular thing, adding that it was the only way to ensure that the scheme was sustained.Virtually all commercial banks in Nigeria had struck the new car finance deals with major vehicle dealers in Nigeria shortly after the bank consolidation. It became a major advert stunt by both banks and car companies.


Experts also celebrated this as a means of encouraging ownership of new vehicles in the country. And this considerably reduced the patronage of imported used vehicles popularly called tokunbo.


While some firms compelled interested buyers to deposit between 10 per cent and 30 per cent of the cost of the vehicles and spread the balance over a period of up to five years, others waved the deposit condition. The interest rate on the zero-deposit purchase was, however, higher than the former arrangement.


The banks expected beneficiaries to commence repayment of the loans immediately.The loan portfolio of the nation’s banking sector was put at N2.2tn after a stress test was conducted last year.


The Central Bank of Nigeria had to inject a total of N620bn into nine out of 10 banks that failed the test.Eight of the banks were recently found to have recovered a total of N540.7bn of their bad loans.





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