Car loan competition delivers consumer savings
Although household debt is already at significant levels, car loan approvals are expected to continue to rise throughout the year. This is despite the rise in fuel costs reported over the same period.
Recent studies have shown that institutions offering new car loans prospered, following on the heels of excellent levels of new car sales in the same period.
Reports also show that the profile of borrowers has changed. With the fierce competitiveness in car loan products, lenders have been forced to rethink the type of person they will consider providing a loan to. Gone are the days where only high earners or more secure borrowers are approved for car loans. These days lenders have to be willing to take on higher risk customers, offering them the same competitive products that the lower risk borrowers have always enjoyed.
Some of these changes include the introduction of:
- Low or no doc loans – where limited written proof is required detailing income, savings history and other financial matters.
- Increased exposure of lenders to unsecured loans.
- Lower fixed interest rates.
- Lower fees.
- Extended loan terms.
The lowering of interest rates on both personal and car loans has made these products more affordable, also contributing to the steady rise of approvals in both.
Higher petrol prices have also impacted upon the car loan market with consumers now turning to smaller, more fuel efficient vehicles which, in general, have a smaller price tag. As a result the average cost of individual car loans is diminishing and the ease with which the average consumer can repay the loan has risen. This results in shorter loan terms and, consequently, less interest paid.
Car loans are expected to continue to boom as the sale of new cars continues to rise over the next 12 months, promising lenders a stable and potentially lucrative market. As a result, borrowers can also expect to see an increase in competitiveness, offering ever-increasing available products. Which is great news if you’re looking for a new car.