PUBLISHED: 24 Oct 2024 at 05:52
Thailand’s used car market is experiencing sluggish sales as many prospective buyers face loan application rejections, according to the Association of Used Car Dealers. Initially, there were expectations for improved sales in the latter half of 2024, contingent upon financial institutions easing their lending criteria.
However, finance companies and banks continue to exercise strict approval processes for loan applications, primarily due to prolonged high household debt levels. Vichai Suwanasilar, president of the association, noted, “The challenges impacting both used and new car markets stem from loan rejections. Limited access to auto loans has led to an oversupply of used vehicles.”
This oversupply is prompting used car dealers to lower their prices, significantly impacting their profitability, he added. Many consumers are gravitating towards used cars, believing they have a better chance of securing loans compared to new vehicles, yet high household debt remains a formidable barrier.
Despite the Bank of Thailand indicating a slight decline in household debt as economic growth picks up, current debt levels still pose a risk, leading banks to be cautious in their auto loan approvals due to concerns over potential non-performing loans.
The central bank reported total household debt reached 16.3 trillion baht as of Q2 2024, equivalent to 89.8% of GDP, slightly down from 16.4 trillion or 90.8% of GDP in Q1.
Additionally, the number of seized vehicles is on the rise as owners struggle to meet loan repayments amidst an economy that has yet to fully recover, with government stimulus measures falling short of expectations, according to the association.
Concerns are also rising over declining electric vehicle prices, leading to a price war among manufacturers. This trend is influencing both new and used car markets, causing potential buyers to postpone purchases in anticipation of further price drops.
Vichai urges the government to advocate for a relaxation of the Bank of Thailand’s “responsible lending” policies, intended to mitigate household debt issues. While the campaign aims to improve household debt quality and lower debt ratios over time, it has inadvertently made auto loans tougher to access, negatively impacting both the new and used car markets.
