Demand for car loans drops

Level of inquiries falls by one-fifth from a year ago but arrears on vehicle finance improves.
Posted on 11 June, 2024
Demand for car loans drops

The demand for vehicle loans in May was down by 20 per cent year-on-year with the drop attributed to the continuing decline in new car sales.

The latest figures from credit bureau Centrix reveal the drop comes at the same time arrears on consumer credit for vehicles have improved.

Keith McLaughlin, managing director, says: “It was pleasing to see a small improvement in arrears, with the number of accounts behind on payments easing slightly to 458,000 – down 5,000 month-on-month – largely driven by lower vehicle loan and buy-now, pay-later arrears.

“However, consumer arrears are 10.5 per cent higher year-on-year, tracking closely to 2018 levels after coming off historic lows and we don’t expect this trend to change in the short term.”

Overall demand for consumer credit was up 2.3 per cent over the same timeframe but Centrix notes the rate of growth has subsided in recent months.

Its May credit indicator report also highlights that consumer arrears, which are a sign of financial stress, show how the cost-of-living crisis has not impacted everyone equally. 

“Consumers under the age of 25 are among those hardest hit, as they are more likely to experience cash flow problems and have limited savings to rely on,” it explains. 

“Consumers aged 40-49 are increasingly experiencing debt stress, with many having home loan commitments. 

“In contrast, consumers aged 50 and above are faring better, with lower levels of arrears since 2020.”