Vehicle loan arrears at all-time high

The percentage of consumers falling behind on payments for vehicle loans has hit a new high of 6.5 per cent of active credit accounts, according to new figures from Centrix.

The credit bureau’s latest monthly report shows arrears on automotive loans hit that level in March this year and were up from 4.9 per cent in the same month of 2023.

Meanwhile, demand for vehicle finance during the first quarter of 2024 was 17.8 per cent lower than during the same period a year earlier.

The overall number of New Zealand consumers behind on credit payments increased to 463,000 in March, up 6,000 from the previous month, and was equal to 12.7 per cent of the credit-active population

Keith McLaughlin, managing director at Centrix, says while consumer arrears remain up year-on-year by plus 7.4 per cent, it’s important to remember most of these have only missed one payment and are likely to self-correct. 

He also notes it will be interesting to see how government reforms to the Credit Contracts and Consumer Finance Act (CCCFA), which aim to reverse the restrictions introduced by the previous administration, will impact Kiwi credit behaviour. 

“We know loan conversions fell following the introduction of the new CCCFA rules in December 2021 – hitting credit cards especially – before beginning to balance out as both lenders and consumers became more familiar with the regulations,” he adds. 

McLaughlin, pictured, explains the fall in demand for vehicle loans could be related to the recent introduction of road user charges and the removal of the clean car discount for electric vehicles.

Centrix’s report also points out that liquidations increased across the board in March as a “tough economic climate” continues to impact Kiwi businesses.

The hardest hit sectors were the retail trade and transport, where the number of businesses put in liquidation jumped year-on-year by 57 per cent and 43 per cent respectively.

More than 230 companies were placed in liquidation during March 2024, the highest monthly total since March 2015.