‘Significant’ jump in value of car loan drawdowns amid rising prices

A sharp rise in vehicle prices in the year to the end of March saw the value of car loans drawn down in the first three months of 2023 surge by almost 40 per cent, new data from the Banking and Payments Federation of Ireland (BPFI) indicates.

On Friday, the lobby group for the banking sector said that both the volume and value of personal loans drawn down in the first three months of the year surged with lending across all categories – from car to home improvement and green loans – up on the same period in 2022.

The data reveals that the value of personal loan drawdowns in the first quarter reached €481 million, the highest level since the banking lobby group’s data series began in the opening three months of 2020. This represented an increase of more than a quarter (25.2 per cent) on the same period in 2022.

The total volume of loan drawdowns, meanwhile, also increased 27.8 per cent year on year to a record 49,236 as demand for debt to fund personal expenditure remained robust.

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Of the total, some 15,167 were car loans – up 27.4 per cent on 2022 – worth €187 million, a “significant” increase of 39.4 per cent amid a sharp increase in car prices, said BPFI chief executive Brian Hayes.

Car prices increased by a sizeable 77.5 per cent from the start of the pandemic to the end of March this year, according to data published by Done Deal in April, amid supply chain bottle necks and notable drop-off in imports of used cars from the UK after Brexit.

While the rate of inflation began to slow in the final months of 2022, used car prices increased by 1.4 per cent from the end of December last to the end of March.

However, the rate of second-hand car inflation slowed to 0.9 per cent in the three months to the June, according to the website’s new Motor Price Index report, the slowest pace since the first quarter of 2020.

Mr Hayes said: “While the average loan value fell overall by about €200 to €9,763, the lowest level since the fourth quarter of 2020, the average car or auto finance loan rose by €1,073 to €11,678, likely reflecting rising car prices and growth in electric and plug-in hybrid vehicles.”

Meanwhile, both the volume and value of loans drawn down to fund home improvements also increased sharply over the 12-month period to the end of March. Some 13,950 loans in this category worth a total of €147 million were drawn down over the period, an increase of 28.7 per cent in volume terms and 17.2 per cent in value.

The number of loans for education, holiday and special occasions such as weddings increased by 27.4 per cent to 20,119 in the first quarter with the value ahead of last year by 17.9 per cent to €146 million.

Green personal loan drawdowns – including loans for electric or plug-in hybrid cars or for home energy upgrades – almost doubled (up 94.5 per cent) to €19.7 million across 875 individual loan agreements, a jump of 82.1 per cent.