Vehicle loan demand falls

The demand for automotive loans has dropped and the proportion of those behind on payments after borrowing to purchase a vehicle has also fallen.

The latest monthly credit indicator report from Centrix shows the demand for loans in the automotive sector fell 11.1 per cent in October, when compared with the same month a year ago.

Personal loans were down seven per cent over the same time frame but credit card demand was up 23 per cent.

Centrix notes there has been an increased conversation rate of loan applications to approvals following revisions to the Credit Contracts and Consumer Finance Act (CCCFA) this year. 

“Credit cards were initially hardest hit when changes to responsible lending requirements under the CCCFA came into effect in late 2021,” it says. 

“However, application conversion rates for personal loans, auto loans, and mortgages have improved since changes to the CCCFA took effect, removing restrictive affordability assessments.” 

The number of people behind on loan payments rose slightly to 461,000 in October, up 3,000 month-on-month, and the equivalent of 12.14 per cent of the credit active population.

Vehicle loan arrears fell back to 6.1 per cent in October, compared with 5.8 per cent for the same month last year, while credit card arrears rose slightly to 4.3 per cent.

Centrix adds arrears are expected to rise over the summer period in line with seasonal trends. 

Business defaults

Keith McLaughlin, managing director, says the company’s business credit insights show organisations across New Zealand are still bearing the brunt of challenging economic headwinds. 

“Business credit defaults are up across the board, up 16 per cent on average year-on-year, with the worst affected sectors including the construction and transport industries,” he adds. 

“Company liquidations across the country are up 27 per cent year-on-year and are on the rise across most regions. 

“Looking at the wholesale trade sector, company liquidations are up 82 per cent year-on-year, indicating the industry is still facing significant challenges with lower demand across the economy.” 

McLaughlin notes motor vehicle, grocery, machinery and equipment, and furniture wholesaling businesses have all suffered a significant rise in insolvencies in recent months.

For motor vehicle and motor vehicle parts wholesaling, which covers 1,628 registered companies, credit defaults are up 17 per cent year-on-year and liquidations have increased by 60 per cent.