Loan rejections plague used car sales

Thailand’s used car market will continue to post sluggish sales as prospective buyers are often rejected when applying for loans, says the Association of Used Car.
The association earlier expected used car sales to improve in the latter half of 2024, pinning its hopes on financial service providers easing their lending criteria.
However, many finance companies and banks remain highly selective about approving loan applications as household debt remains high, said Vichai Suwanasilar, president of the Association of Used Car.
“Both used and new car markets are facing the same challenge — loan rejections. The difficulty in accessing auto loans is leading to an oversupply of used cars,” he said.
This will cause used car dealers to sell their vehicles at lower prices, damaging their businesses, said Mr Vichai.
Many people prefer to buy used cars, believing they can qualify for loans more easily than purchasing new vehicles, but the high level of household debt has become an obstacle, he said.
Though the Bank of Thailand reports household debt is declining as economic growth rises, the debt level remains ample, causing banks and financial service providers to be cautious about granting auto loans based on fears of non-performing loans.
The central bank reported total household debt tallied 16.3 trillion baht as of the second quarter of 2024, representing 89.8% of GDP, down from 16.4 trillion or 90.8% of GDP in the first quarter.
However, the number of impounded cars continues to rise because owners cannot afford to repay their loans, as the economy has yet to fully recover and the government stimulus measures have not significantly improved the economy, according to the association.
Mr Vichai said he is concerned over the decreasing prices of electric vehicles, leading to a price war among some companies.
This situation affects both the new and used car markets, causing potential buyers to delay purchases as they wait for prices to fall further, he said.
Mr Vichai wants the government to ask the central bank to relax its “responsible lending” campaign, which was launched to combat the severe household debt problem.
Responsible lending is meant to enhance the quality of household debt and reduce the debt ratio over the long term.
But this campaign is making it more difficult to access auto loans, dealing a blow to the new and used car markets, he said.