Downpayment for car loans to be enforced

National 2 minutes, 1 second

BANDAR SERI BEGAWAN

CAR buyers who have enjoyed downpayment-free purchases may be up for stringent enforcement of a rule that requires any borrower in Brunei to shell out a minimum amount before taking that new vehicle out of the showroom.

The Ministry of Finance issued this directive years ago and the Second Minister of Finance yesterday emphasised to financing companies the need to enforce it in line with the call for prudent practices in the banking and finance sector.

Second Minister of Finance Pehin Dato Seri Setia Awg Hj Abd Rahman Hj Ibrahim said: "I wish to draw industry players' attention to the directive issued a few years ago by the Ministry of Finance requiring borrowers of finance companies to contribute to the downpayment of their car purchases via the stated minimum down payment requirement."

He made the reminder yesterday at the opening ceremony of the new head office of Baiduri Finance Bhd at Sumbangsih Bahagia, where he emphasised the ministry's work in reviewing its standards and updating them in line with international best practices.

"This measure (requiring downpayment for car purchases via financing schemes) is put in place to help finance companies mitigate some of the borrowing risks relating to automobile purchases," said Dato Seri Setia Awg Hj Abd Rahman.

While the directive was issued years ago, it remains common knowledge in Brunei that anyone opting for car financing can actually drive a new car out of a showroom without a downpayment.

Liberal car loans have apparently helped keep the automobile market vibrant. Last year, car dealers sold 14,354 units, up from 12,523 the previous year, according to data from the Brunei Automobile Transport Association.

Pehin Dato Seri Setia Awg Hj Abd Rahman said the ministry continues to strengthen its regulatory and supervisory capacity "to ensure compliance by industry players as our way to encourage a healthy and sustainable financial industry".

Finance companies, moreover, play a crucial role in ensuring that their own "prudent financial management" remains the key to achieving a "sustainable industry".

Pehin Dato Seri Setia Awg Hj Abd Rahman added: "Management that is industry leading will always stand at the head of identifying and mitigating risks (such as non-performing assets or NPA) that could jeopardise the present and future interests of shareholders and depositors."

"Timely action" must be taken to manage the risks, he said.

The Brunei Times