Automotive financing firms wary of new fiduciary rules

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Having coped since June with higher down payment rules that caused the recent decline in motorcycle sales, automotive financing firms are preparing for yet another rule that may further reduce sales.

The new Finance Ministry regulation on the financing standards for two-wheeler vehicles, PMK No. 130/2012, effective from Oct. 7, stipulates that the firms must register fiduciary certificates with the Law and Human Rights Ministry no later than 30 days after their customers sign financing agreements.

The new rule will prohibit the firms repossessing motorcycles from customers who fail to repay their loans without permission from the Law and Human Rights Ministry. Simultaneously, it will provide a legal guarantee for the firms in default situations.

While acknowledging its benefits, the Indonesian Association of Financial Services (APPI) chairman Wiwie Kurnia said that the new rule was too “complicated” to put into practice.

“While it will only cost around Rp 50,000 [US$5.21] for a fiduciary certificate, the charge will inevitably increase for customers outside Java, who need to go to big cities to get certification, because a notary will be required to handle it,” he told reporters in Jakarta on Thursday.

When the services of a notary were included in the registration process, he said, customers might have to pay between Rp 500,000 and Rp 1 million for one certificate.

The additional costs will impose more burdens on customers as they are now required to make a minimum down payment of at least 25 percent of the value of the motorcycle they wish to buy. The new down payment requirements for auto purchases came into effect on June 15.

Data from the Indonesian Motorcycle Industry Association (AISI) showed on Monday that motorcycle sales in August were down 36.8 percent from the same period last year to 429,263 units, the sharpest decline since the new down payment rule came into effect.

In his presentation before APPI members on Thursday, PT Astra Honda Motor president director Margono Tanuwijaya predicted motorcycle sales this year of around 6.8 million to 7 million units, down by 15 percent from the 8.01 million units sold in 2011.

He predicted that motorcycle sales would experience growth of 2 to 3 percent to around 7.25 million in 2013, but warned that the figure might decrease due to the fiduciary rule as well as the planned rule to include sharia financing in the new down payment requirements. (asa)