New-car buyers drive another credit wave

It has already been reported that new-vehicle sales got off to a strong start for the year, but there is yet another sign that the worst of the global financial crisis may be in the rear view mirror.

Demand for car loans by private buyers in January outpaced the overall increase in sales, according to data collected from Australian financial institutions by vehicle finance bureau Veda Advantage.

The number of car loan applications by private buyers increased by 17 per cent in January 2010, compared with December 2009.

New vehicle sales rose by 11.6 per cent in January 2010 compared with the same month the previous year, according to figures from the Federal Chamber of Automotive Industries.

"Private new-car buyers were clearly taking advantage of end-of-year sales, and it seems consumer confidence is returning to some Australians," said the head of Veda Advantage, David Scognamiglio.

The January data also showed that demand for finance on company cars dropped dramatically following the end of the Federal Government’s business tax incentive on December 31, 2009.

"January is typically a slow month for business fleet sales but the drop in credit applications was sharper than in previous years -- 40 per cent less than December 2009, which was a boom month because of government tax incentives," said Scognamiglio.

Interestingly, the loan application data is at odds with the official new-car sales tally for business fleets.

Sales of new cars to businesses were unusually strong in January -- up 35 per cent compared with the same month last year -- as some deliveries aiming to meet the December 31 tax incentive cut-off actually spilled into the new year.

Given that the index monitors the number of car loan applications -- as opposed to the number of deals signed -- and that loan applications can take a couple of weeks to process, the data is more of a guide as to how demand for new car sales is tracking for the following month.

The data also revealed that applications for finance on used cars almost halved in January 2010, compared to the same month the previous year.

"Used car finance enquiries dropped by 48 per cent, which could mean a lot of customers are either stepping up to a new car or paying up-front for a used car," said Scognamiglio.

"Businesses and private buyers have injected a lot of used cars into the market because of their trade-ins. So we predict there will be a glut of used cars in the market for the next few months, which may result in some great deals on offer."

The data also showed that the average value of personal car loans increased by $86 to $21,219, and the average value of company car finance increased by $960 to $42,814 in January 2010 compared with the same month the previous year.

-- graph courtesy VFACTS

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