Easing lending criteria to stem new car sales bloodbath

Photo by Obi Onyeador on Unsplash

Australia's peak car industry body hopes easing lending criteria will offset declining car sales, with September marking the 30th consecutive month of declines.

According to the Federal Chamber of Automotive Industries' (FCAI) monthly 'VFACTS' report, 68,985 new cars were sold in September, which is 21.8% down on September 2019.

In the year to date, car sales are down 20.5% from the corresponding period in 2019.

FCAI chief Tony Weber said the industry is hoping for a positive turnaround because of two factors.

"First of all, we are seeing COVID-19 health restrictions across Australia, and particularly in metropolitan Melbourne, continue to ease," he said.

“Another sign that the market may improve is the announcement by the Federal Government last week of an easing of lending conditions for private buyers and small business in Australia. 

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The easing lending criteria places the onus on the borrower to be truthful in their loan applications, which would shorten the application process.

While it was announced with a focus on home loans, it would presumably also extend to the car loans sector.

FCAI said stricter lending criteria has been one of the "major factors" contributing to the decline in new car sales, along with coronavirus, bushfires and a weaker Australian Dollar at the start of the year.

The sedanapocalypse

While new car sales are down overall, the mix of types of cars on the road is changing.

SUVs with light commercial vehicles (i.e. utes) make up more than 70% of new car sales.

In the SUV space, light SUVs are up 11.4% on the month compared to September 2019, while upper large SUVs are up 4%.

These were two of the only three segments to experience growth, with the third being light commercial vans, up 4.5%.

In the passenger segment (hatchbacks, sedans), plug-in hybrid sales are also up 190.9% - albeit selling at very low volumes - as are regular hybrids, up 39.4%. 

This was largely aided by popular green vehicles such as the Hyundai IONIQ (up 200%). 

Fully electric vehicle sales were also up 41.2% in September, while hybrid SUVs also saw a 229.7% surge in sales.

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