DBS Plans to Take Lion’s Share of Used-Car Loans

DBS has doubled its used-car loan market share, space traditionally dominated by lenders like Hong Leong Finance and Maybank. It hopes to grab 80 percent of used-car loans taking place online by 2021.

The bank’s decision to focus on the used-car segment came about two years ago, partly due to regulatory changes as well as expectations of decreasing certificates of entitlement (COEs) over time.

«With the COE quota reducing, the argument is that the premium could possibly go up, but we have not seen it yet as it’s too early to tell,» said Nelson Neo, head of new business for DBS’ deposits and secured lending division.

«So what we see is really the potential, where consumers will continue to buy used cars, so that’s why we decided to intensify our focus around used cars,» added Neo, who plans to plans to rev up growth in used-car loans by 20 percent.

Prior to 2018, used-car loans made up 10 percent of the bank’s auto loans, with new-car loans accounting for the rest. Now that used-car loans make up 20 percent, DBS is aiming for 80 percent of used-car loans taking place online by 2021.

The rapid expansion was a combination of competitive pricing by offering one of the lowest rates in town, stronger partnerships with dealers, and enhanced digital capabilities that allow car owners to complete a loan application online, Neo said. Its interest rates for used cars are similar to new cars at about 2.28 percent.

Two years ago, used-car loan rates were higher than that of new cars, but they have since fallen to either on par or even lower, depending on promotions.

Aside from its new car pricing strategy, it is the bank’s data and digital capabilities that have been a game-changer.

Last October, DBS fully digitized its sign-ups, allowing customers to apply online either through the national data repository MyInfo or DBS’ digital banking platform.