Car loan arrears tipped to grow

Demand for vehicle loans is down and the proportion of people in arrears over car finance has increased, with fears the latter figures could deteriorate over the summer months.

New figures from Centrix, the credit bureau of New Zealand, show current demand for vehicle finance is down 16.1 per cent from last year. 

This total is a key factor in overall consumer credit demand falling 2 per cent when compared with last year, although Centrix’s October credit indicator report notes the rate of decline is slowing.

Meanwhile, the share of vehicle loans in arrears rose to 6.4 per cent in September, up from 5.4 per cent in the same month of 2023.

The overall number of people behind on payments, including mortgages and credit cards, fell by 3,000 month-on-month to 458,000, which was equivalent to 12.1 per cent of the credit active population.

The number of consumers 30-plus days past due was 156,000, of which 74,000 were 90-plus days in arrears.

Keith McLaughlin, Centrix managing director, says there are signs of economic optimism on the horizon, such as falling inflation and the official cash rate being shifted lower.

But he notes credit insights from the past month also reveal a bumpier road ahead for consumers and businesses across the country. 

“The number of Kiwis behind on their payments is down slightly to 458,000, however, current arrears levels are 3.5 per cent higher year-on-year, tracking just above 2018 levels,” continues McLaughlin, pictured.

“We expect arrears to rise over the summer period, in-line with forthcoming festive spending and wider seasonal trends.

“Turning to the business credit side of things a sombre picture emerges. Credit defaults are up on average by 16 per cent across the board, with the transport and construction industries worst affected. 

“Company liquidations are up 25 per cent year-on-year, the highest monthly total in 10 years, with the construction industry continuing to see the highest proportion of these liquidations.”