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Puerto Rico’s Auto Loans Portfolio Fell 2.6% to $6.5B Through Last September

By on February 16, 2016

While Puerto Rico’s new-vehicle market fell 7.8% to 81,353 new units sold last year, the island’s auto loans portfolio dipped only 2.6% to $6.5 billion through September, the latest figures available, thanks to the financing of used vehicles. Last year, auto leases in the Puerto Rico market totaled $836.9 million.

Néstor Vale, executive vice president of Reliable Financial Services, the local subsidiary of West Fargo, said the auto industry as a whole—distributors, dealers, banks and auto insurance companies—has been affected by the ongoing uncertainty over Puerto Rico’s fiscal and budget woes.

“The news you read and see in the local and national media about Puerto Rico is not good—local firms are closing, multinational companies are in [legal] disputes with the central government…. Obviously, all this creates more uncertainty. As more people lose their jobs or there’s a possibility they could lose them, this lessens the chances of consumers acquiring homes or new vehicles,” Vale told Caribbean Business. “This in turn dissuades those who want to invest in Puerto Rico or acquire homes or new vehicles.”

In his opinion, as long as there is no clear direction and a uniting message from the government and the private sector, people will keep losing trust about investing in Puerto Rico.

“This [scenario] had a direct effect on the decline experienced by local new-auto sales last year,” the Reliable executive said.

While there are no official statistics on used-car sales on the island, in terms of Reliable’s position, Vale said 58% to 60% of monthly loan applications received last year were for used vehicles.

“This indicates a strong interest among local consumers for more economical vehicles. In Reliable’s case, our approved customers ended up buying slightly more new vehicles than used ones. I attribute that to the excellent work done by auto distributors and their dealers to offer the best deals possible in terms of offering bonuses and lower interest rates, jointly with the banks, to incentivize the sale of new vehicles,” Vale indicated.

Pricewise, local consumers prefer to have more economical, fuel-efficient entry-level vehicles, and in the case of domestic brands, sport-utility vehicles, or SUVs, are selling the most, he said.

“Puerto Rico banks and auto finance companies continue to strongly support local dealers. There’s appetite on our part to lend, and we try hard to fulfill the needs of each particular client, which is inherently different from each other. In Reliable’s case, this is very important as we maintain our leadership in the local market with a 25% market share in retail auto lending, with commercial lending even higher,” Vale said. “Over the past 12 months, we haven’t lost a significant dealership, and we even added one significant big client to our list, Bella Group.”

Among local banks, he said Reliable commands 40% of the floor-plan financing on the island. The number would be much higher if real estate and term loans are included,” he added. “We have a very strong retail- and commercial-loan portfolio, which combined is in excess of $2 billion in outstanding loans. That says a lot about our market participation and the support we give to the island’s auto industry.”

 

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