Car banks take on traditional lenders for financing market
Most of the new outfits are small institutions backed by a major car producer, such as Opel Bank Polska, Fiat Bank Polska, Ford Bank Polska and the youngest, Volkswagen Bank Polska. While they have not yet chewed substantially into the universal banks' car-lending business, bankers here said that it is only a matter of time before they feel the squeeze.
"It's inevitable," said Stanislaw Slaby, who works in the retail banking department at Powszechna Kasa Oszczednosci Bank Panstwowy (PKO BP). "In Western Europe, each car producer has its own bank."
And many of the car banks have two key advantages, he said: speed and ability to negotiate.
"The banks can influence several parts of the equation," Slaby said. "The credit price, but at the same time the car price."
The car banks also operate faster because they can begin processing a loan application while an interested buyer is still haggling over the actual car. The car banks can usually come back with an answer within one hour.
"It's one-stop shopping," said Olaf Nietzsch, president with Ford Bank Polska. "Our main advantage is customer service."
Ford Bank opened its bank here in July 1997 and sells its products through 53 Ford dealers. By the end of August, the bank's portfolio consisted of 3,000 loans with an average value of zl. 25,000-zl. 30,000. That puts the bank's total loan portfolio at about zl. 75 million ($20.8 million).
And the car banks said that they intend to slice the application-response time further.
"Our commitment is to cut the procedure to half an hour," said Maciej Brzozowski, press spokesman for Fiat Bank Polska. The bank started its operations in June and by the end of this year plans to issue 20,000-25,000 loans for Fiat-made cars, such as the standard Fiat, the Lancia and upscale Alfa Romeo.
But in spite of dynamic car banks, PKO BP is still the leader in car loans, even though the bank started lending to the sector relatively late - in 1995. By the end of July 1998, PKO BP had issued 43,300 loans worth zl. 750 million ($208 million). That is more than the bank loaned for all of 1997, during which it issued 45,000 car credits worth a total of zl. 700 million ($194 million).
Car sales jumped 27% in 1997 and a further 10% so far this year.
Other serious players include Kredyt Bank PBI, which at the end of June 1998 held car loans worth zl. 442 million ($122.78 million). Those loans account for 40% of the bank's entire credit portfolio.
Pekao is also a big lender. The bank's portfolio of car loans stood at zl. 64 million ($17.78 million) at the end of June.
PKO said that it has managed to become the No. 1 car financier because it operates an extensive network throughout the country. The bank has more than 1,000 branches and has hammered out financing agreements with 325 dealers nationwide. Those agreements enable the customer to arrange a loan through his respective car dealer, or come into the bank's branch and apply separately. While the bank's paperwork is more involved and its loan approval lag is longer - it takes 24 hours to decide - PKO is largely considered to be the least expensive lender.
The bank offers the car loans with a maturity of up to five years and will cover up to 100% of the auto's value. The lowest interest rate is 22% for a one-year loan and 23.5% for a five-year loan. The bank charges a commission fee of 0-2%, but existing bank customers can take out a loan without being charged any fees.
As the market becomes more competitive, the banks are touting not only their quick decision time and rates, but also the sophistication of their products.
Opel Bank Polska, for example, offers a "smart buy" loan - a product that combines a credit with a lease. The loan is divided into 24 installments and a balloon payment, similar to a leasing arrangement. When the balloon payment - one large sum - comes due, the customer can decide to pay it and keep the car, or to sell the auto back to the dealer or to a third party, said Christian Weidemann, deputy president of Opel Bank.
"It's becoming a more and more popular alternative to a car lease," he said.
At the end of August, Opel Bank had outstanding loans of zl. 280 million ($77.78 million), compared with zl. 150 million ($46.86 million) at the end of 1997.
"It's inevitable," said Stanislaw Slaby, who works in the retail banking department at Powszechna Kasa Oszczednosci Bank Panstwowy (PKO BP). "In Western Europe, each car producer has its own bank."
And many of the car banks have two key advantages, he said: speed and ability to negotiate.
"The banks can influence several parts of the equation," Slaby said. "The credit price, but at the same time the car price."
The car banks also operate faster because they can begin processing a loan application while an interested buyer is still haggling over the actual car. The car banks can usually come back with an answer within one hour.
"It's one-stop shopping," said Olaf Nietzsch, president with Ford Bank Polska. "Our main advantage is customer service."
Ford Bank opened its bank here in July 1997 and sells its products through 53 Ford dealers. By the end of August, the bank's portfolio consisted of 3,000 loans with an average value of zl. 25,000-zl. 30,000. That puts the bank's total loan portfolio at about zl. 75 million ($20.8 million).
And the car banks said that they intend to slice the application-response time further.
"Our commitment is to cut the procedure to half an hour," said Maciej Brzozowski, press spokesman for Fiat Bank Polska. The bank started its operations in June and by the end of this year plans to issue 20,000-25,000 loans for Fiat-made cars, such as the standard Fiat, the Lancia and upscale Alfa Romeo.
But in spite of dynamic car banks, PKO BP is still the leader in car loans, even though the bank started lending to the sector relatively late - in 1995. By the end of July 1998, PKO BP had issued 43,300 loans worth zl. 750 million ($208 million). That is more than the bank loaned for all of 1997, during which it issued 45,000 car credits worth a total of zl. 700 million ($194 million).
Car sales jumped 27% in 1997 and a further 10% so far this year.
Other serious players include Kredyt Bank PBI, which at the end of June 1998 held car loans worth zl. 442 million ($122.78 million). Those loans account for 40% of the bank's entire credit portfolio.
Pekao is also a big lender. The bank's portfolio of car loans stood at zl. 64 million ($17.78 million) at the end of June.
PKO said that it has managed to become the No. 1 car financier because it operates an extensive network throughout the country. The bank has more than 1,000 branches and has hammered out financing agreements with 325 dealers nationwide. Those agreements enable the customer to arrange a loan through his respective car dealer, or come into the bank's branch and apply separately. While the bank's paperwork is more involved and its loan approval lag is longer - it takes 24 hours to decide - PKO is largely considered to be the least expensive lender.
The bank offers the car loans with a maturity of up to five years and will cover up to 100% of the auto's value. The lowest interest rate is 22% for a one-year loan and 23.5% for a five-year loan. The bank charges a commission fee of 0-2%, but existing bank customers can take out a loan without being charged any fees.
As the market becomes more competitive, the banks are touting not only their quick decision time and rates, but also the sophistication of their products.
Opel Bank Polska, for example, offers a "smart buy" loan - a product that combines a credit with a lease. The loan is divided into 24 installments and a balloon payment, similar to a leasing arrangement. When the balloon payment - one large sum - comes due, the customer can decide to pay it and keep the car, or to sell the auto back to the dealer or to a third party, said Christian Weidemann, deputy president of Opel Bank.
"It's becoming a more and more popular alternative to a car lease," he said.
At the end of August, Opel Bank had outstanding loans of zl. 280 million ($77.78 million), compared with zl. 150 million ($46.86 million) at the end of 1997.
