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Auto Loan Rejections in Thailand Projected to Hit 40% as Household Debt Soars

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Auto Loan Rejections in Thailand
Local auto industry outlook dims as impact of high household debt: File Image

Due to soaring household debt the auto loan rejection rate in Thailand is expected to total 30-40% of applications this year, similar to last year, given ongoing concern over bad debt among lenders, says the Federation of Thai Industries (FTI).

Prospective pickup buyers are the most likely to have their loan requests denied, resulting in continued slow sales in the crucial segment, according to the federation.

“The rejection rate continues to rise, which will have a significant impact on auto-related businesses along the supply chain, such as car seats, tyres, glass, and electronic components,” said Surapong Paisitpatanapong, vice-chairman of the FTI and spokeswoman for the Automotive Industry Club.

Banks are wary of making auto loans, especially now that the Bank of Thailand has initiated its “Responsible Lending” campaign to address the country’s major household debt problem, he said.

Responsible lending aims to improve the quality of household loans and lower long-term debt ratios. The country’s household debt-to-GDP ratio is unsustainable at 91%, compared to an average of 60% in other emerging markets.

Mr Surapong encouraged the government to implement policies to boost the automobile industry, which is a key component of the manufacturing sector and the country’s exports.

According to the club, pickups account for 55% of all car exports, with passenger cars and other vehicles accounting for the remainder.

Car Production

Car Production Down Dramatically

Mr Surapong stated that car manufacture and exports must be strictly monitored following the Office of Industrial Economics‘ report that car production fell for the ninth consecutive month in April, owing to stricter credit criteria, low consumer purchasing power, and the economic recession.

According to the FTI, automobile manufacture fell 11% to 104,667 units, with pickup output falling 45.9%. From January to April, car production fell 17% to 518,790 units.

In April, domestic car sales fell 21.5% year on year to 46,738 units. Car sales fell 23.9% in the first four months of the year, totaling 210,494 units. Car exports declined by 6.8% year on year in April, owing to weaker demand from trading partners.

In view of the new data, Mr Surapong stated that the FTI club is considering lowering its auto manufacturing target for Thailand this year.

Earlier this year, it set a manufacturing target of 1.9 million vehicles, a 3.15% increase from the previous year, with 1.15 million for export and 750,000 for domestic sales.

Car manufacturers and dealers anticipate that events such as the Fast Auto Show Thailand, which runs from July 3 to 7, and the Bangkok International Motor Expo, which takes place in the fourth quarter, will help boost car sales in the second half of the year.

He also expects that state budget investment would increase economic activity, which should benefit the car industry.

Car loan Thailand

 

Getting an Auto Loan in Thailand

There are a couple important things to know if you’re considering applying for a car loan in Thailand. Interest rates can differ greatly based on your credit score and the bank. Though it’s wise to look around, many institutions provide competitive rates.

In most cases, Thailand auto loans call for a down payment of at least 20% of the vehicle’s worth. Usually, a loan lasts between three and seven years. You’ll have to submit residency details, a valid ID, and evidence of income.

For foreign nationals, the procedure could be a little more involved and call for extra documentation like a letter from your company or a work authorization. A guarantee may be requested by some banks as well. Usually monthly repayment plans are in place, and paying on time is essential to avoid fines.

Recall that the bank may take your car away if you don’t pay back the loan; it acts as collateral. All things considered, provided you fulfill the requirements and get all the paperwork needed, obtaining a car loan in Thailand can be easy.

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