Dealers top liquidation risk ratings

Dealerships and other automotive retailers are 2.3 times more likely to be placed into liquidation than typical New Zealand businesses, according to new figures from credit bureau Centrix.

The bureau’s June credit indicator report shows there are 43,012 registered companies in retail trades, with 3,357 of those selling motor vehicles or parts.

Those automotive businesses have a liquidation rating of 2.3X, the highest among the 11 classifications that make up the retail sector. Centrix notes the average rating for the retail trade is 1.2X. 

Analysis by Centrix shows credit demand for businesses selling motor vehicles and parts increasing 6 per cent year-on-year, below the retail sector’s average of 16 per cent. 

Credit defaults for motor-vehicle businesses were up by 33 per cent over the same period, compared with an average of 20 per cent for all retailers, the report reveals.

Keith McLaughlin, managing director of Centrix, says company defaults and liquidations rose in May with 233 companies placed in liquidation – the highest May figure recorded since 2014.

“Year-on-year, all sectors have seen liquidations rise with retail trade companies experiencing the largest increase annually followed by the property/rental and transportation sectors,” adds McLaughlin, pictured.

“There’s plenty of uncertainty about the future, with many anticipating the challenging conditions to persist well into 2025.”

Over the past 12 months, retail liquidations have increased by 44 per cent compared with the previous year. That includes 14 retail companies suffering such a fate in May 2024, the highest monthly total since August 2023. 

Arrears climb

Consumers are also struggling and the credit indicator report shows the number falling behind on payments increased by 16,000 in May, with arrears tracking 8.2 per cent higher year-on-year. 

It meant the number of consumers in arrears in May rose to 12.64 per cent of the credit active population, or 474,000 people, which was up from 12.52 per cent  and 458,000 in April. 

Of those, 173,000 were 30-plus days past due and 114,000 at 60-plus days in arrears. 

Vehicle loan arrears dropped to 5.5 per cent in May, compared with 5.7 per cent in the same month of 2023, while those behind on credit card payments fell to 4.7 per cent.

As for non-mortgage new lending, which includes vehicle/personal loans, credit cards, buy-now, pay-later and overdrafts, this was down 10.7 per cent year-on-year, impacted significantly by the lower volume of new car sales compared to 2023.

McLaughlin adds: “The challenging economic climate continues to persist. For example, we saw consumer arrears climb last month as pressure from the cost-of-living crisis endures. 

“Despite falling in April, we’ve also seen auto arrears gradually increase over the last few years, another sign economic pressures are continuing to impact people’s larger, more substantial repayment obligations.”