By Yevgeny Belyakov
At the end of 2008, Prime Minister Putin promised that the Government would partially cover consumers' car loans. "Regardless of the interest rate on the loan, we will cover a portion of the rate," the Prime Minister said. "Those planning to buy a car made in Russia will be better off buying it in 2009," Putin said. Komsomolskaya Pravda (KP) has verified how the promise is being realised.
NO ONE KNOWS ANYTHING
I visited a Lada dealership on Tulskaya.
- Can I get a loan for a car?
- Certainly, one of the five ladies at the financing department responded quickly. They did not seem be very busy there. How much do you want to spend and what model are you interested in?
- Lada Kalina or Lada Priora. I would like to stay within the 300,000 rouble-price range and would prefer the smallest possible down payment, please.
After brief calculations, it turned out that I was eligible for a loan from VTB-24 Bank under an annual interest rate of 20%. In case I took a 3-year loan for 300,000 roubles, it would have cost me 170,000 roubles on top of it, under that interest rate.
- Are there lower rates available?
- Sberbank offers 11.5% for "classical" loans. However, it will take 5 business days to process, and you will need to submit a 2-NDFL form and a copy of your employment record. Rates at other banks start at 20%, but the processing time is only an hour and there is no need to submit any paperwork, except for a passport.
- I am not in any hurry. What about the loan subsidies that Putin promised? Do you provide those?
- You probably mean the loan subsidies for the vehicles made in Russia? The lady was quick to respond. We have not received any instructions about the scheme. I would think those loans would be processed through Sberbank.
I went to the nearest Sberbank branch for further details.
- Do you issue car loans?
- Yes, we do. Rates start at 11% per year, said the teller. The minimum down payment is 20% of the total cost. Plus, we charge 6,000 roubles for processing.
- Excellent. Is it easy to get a loan? They say the requirements have gotten stricter due to the crisis. What about the subsidies, can I receive them through Sberbank?
- No extra requirements; the rates went up slightly, by about 2%. I have heard about the subsidies, but we do not have formal instructions yet. Would you like to apply for a loan?
WHERE ARE THE PROMISED SUBSIDIES?
It appears that loans are widely available, but the best rates are offered by Sberbank. Of course, the terms are more stringent there. As for the loan subsidies, there is no information about them. I should probably inquire with Government officials.
"The issue is being actively elaborated," I was told at the press-service of the Industry and Trade Ministry. "The text of the law is being discussed with all relevant agencies, and the subsidy procedures are being elaborated. We want to ensure that the document is fully ready. It will be submitted for Government approval in the very near future."
It is better to wait then, especially for the three main principles of the loan subsidy to be disclosed. The first is that the law will apply only to new vehicles made in Russia. This means that I will be able to choose from the entire range of Russian made cars (from Oka to Volga) and a few low-cost foreign models assembled in Russia (see chart for details). The second principle is that only the vehicles priced under 350,000 roubles will be subsidised. Finally, the third principle is that a loan must be taken out on a vehicle. The Government will cover the 8.6% interest rate on the loan (which makes up 2/3 of Central Bank's refinancing rate of 13%).
Essentially, if you take out a loan at a private bank, then the interest rate will be reduced to Sberbank's rate, while if you receive a loan from Sberbank, then "after the subsidy" the interest rate will be close to zero. The Government's generosity looks a bit suspicious, however.
WHY IS THIS DONE?
"This decision is aimed at supporting the Russian automobile industry," says Mikhail Pak, Metropol analyst. "All models made by AvtoVAZ, for example, will qualify for the subsidy, because even the top model, "Lada Priora", will only cost 330,000 roubles in full. The Government wants to support the demand in this market segment."
This is true. The Government's initiative will benefit not only consumers, but also Russian car manufacturers like AvtoVAZ, GAZ, and others. According to Rosstat (national statistics agency), demand for Russian cars last November dropped by 25% compared with October sales. Some of the employees were laid off while others' salaries were cut. Finally, in December, the factories suspended work and sent employees home. The work only resumed this week, but on a truncated-week basis.
For these reasons, the Government decided to support domestic car makers. In 2008, car loans were the main drivers of sales. Almost 50% of all cars were sold through loans. Based on the data provided by the Union of Russian Car Makers, this January only 20% of all cars were bought through loans.
Ordinary customers will only benefit as a result, as they will be able to buy a car on a low interest loan. Of course, an expensive foreign model like a Toyota Camry, also assembled in Russia, costs much more than 350,000 roubles, but helping wealthy customers is not the Government's goal under this initiative. They will be able to take care of themselves. Naturally, the subsidies will not be able to improve the quality of Russian cars, but they will at least prevent more layoffs at AvtoVAZ.
What is important now is to ensure that the Prime Minister's initiative is not buried in endless discussions among various ministries and agencies. After all, 2009 has already started.
KP will be following up on the issue.
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How have the loan requirements changed
On average, the interest rates have increased by 2%, to their current rate of 5%.
The loan terms have become a bit more stringent. There are no more loans without down payments, and the minimum down payment is now 15% to 20% of the cost of the vehicle. In addition, the borrower will have to cover the car insurance out of pocket. Overall, however, receiving a car loan is not a problem.