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‘Strong’ demand for car loans

Kiwis better managing economic squeeze as arrears on vehicle borrowing starts to improve.

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Demand for vehicle loans remains strong and arrears on such deals have improved for the first time in six months, according to the latest credit data.

Credit bureau Centrix notes in its October report that overall consumer demand for loans has returned to pre-pandemic levels, which was driven by an increased volume of applications for personal borrowing.

The number of new consumer loans granted in September was 18 per cent higher than in the same month of 2021, which the company says reflects the expectation that consumers are turning to credit to fund spending.

“Demand for personal and vehicle loans remain strong despite the challenging economic climate, with new credit card applications up three per cent year-on-year,” adds the report.

“Arrears on vehicle loans have improved slightly after rising for the past five months, while arrears on unsecured personal loans have also edged down to 7.6 per cent.”

In its previous monthly report, Centrix noted arrears on vehicles loans had hit their highest level since January 2021 and stood at 4.8 per cent.

Keith McLaughlin, managing director of Centrix, says the economic climate remains challenging for many Kiwis as they continue to adjust to the impacts of inflation and the rising cost of living.

“This squeeze is being reflected in borrowing, as consumer credit demand has started to climb again to pre-pandemic levels, with personal loans on the rise as Kiwis turn to credit to support their spending,” he explains.

“Despite this, consumer arrears appear to be levelling out month-on-month as Kiwis begin to manage this new reality.”

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