In the latest twist to the familiar cash rebate offered for each auto loan taken, DBS Bank has come up with a novel scheme where borrowers get a salary rebate and so far, it looks like it could be a hit with more than 1,000 applications submitted in the first week alone.

DBS says the combined loan amount of those applications, received when the promotion began on March 1, tops $50 million.

And that amount has further increased although the bank declined to give actual figures.

'Since the launch of the DBS Auto Loan Salary Bonus promotion, our loan volume has doubled for the period March 1-19, 2007, compared with the same period last month,' says Koh Kar Siong, DBS Bank's managing director and head of secured loans.

Called the DBS Auto Loan Salary Bonus Package, the bank gives the borrower up to one month of his salary in cash, subject to terms and conditions of course.

It works in this way. Say you have a monthly gross basic salary of $3,000 and you would like to take a loan of $50,000 - payable over seven years - to buy that dream Suzuki.

To determine whether you qualify for a salary rebate, the bank calculates your salary-to-loan-quantum ratio and any number that falls between its preset limits of 5.00 per cent and 6.88 per cent will lead to a 'salary bonus payable to the customer via cashiers order or DBS/POSB account crediting upon loan disbursement'.

In the above case, take $3,000, divide it by $50,000, multiply by 100 per cent and the result is 6 per cent.

Since 6 per cent of the loan quantum is $3,000, that means a customer gets a cash inducement equivalent to one month of his salary for signing up with DBS. But if the salary-to-loan-quantum ratio falls below 5 per cent, then the applicant will be eligible for the minimum 5 per cent rebate of the loan amount.

If the ratio turns out to be over 6.88 per cent, the customer will be entitled to a maximum 6.88 per cent of the loan amount.

DBS says it set these two parameters - the minimum 5 per cent and maximum 6.88 per cent of loan amount - after taking into account the 'current competitive offerings in the market'.

'With the booming economy and better remuneration, DBS wants to reward our customers with this attractive salary bonus, where the cash rebate they will receive is personalised to each individual's monthly salary,' explains Mr Koh.

There are a few loan conditions, of course, such as the minimum financing possible has to be 50 per cent of the car's purchase price, up to a maximum of 100 per cent, while the minimum loan amount is $10,000 with no maximum upper limit.

The loan tenure must also be between seven and 10 years with a flat interest rate of 3.50 per cent per annum.

The scheme also applies to new passenger vehicles only but excluding off-peak cars.

The promotion is valid from March 1 to April 30, 2007.

In general, a cash rebate is a common feature of an auto loan package here, and DBS is merely repackaging the way it is being offered.

Most banks and finance companies publish the prevailing flat rate as 3.25 per cent for loans of one to six years, and 3.5 per cent from seven to 10 years.

However, car dealers say that there is an unpublicised rate of 3.98 per cent for loans of seven to 10 years, where a cash rebate equal to about 30 per cent of the total interest payable is given upfront.

Some borrowers welcome this amount because it helps in the full settlement of their existing cars.

For example, a loan of $50,000 over 10 years at 3.98 per cent will result in a cash rebate of $5,970.

But if a cash rebate is not required, then the interest rate quoted can be as low as 2.88 per cent for seven to 10 years.

'Car loan interest rates have been holding steady for the last two years, with all the players in the market offering the same set of rates,' says one motor trader. 'There hasn't been any under-cutting because of the lack of competition.'