Despite sluggish sales in the domestic automobile market, the average ticket size of auto loans has increased by a robust 20% indicating a consumer preference for more premium vehicles, reveals a study by credit information company Credit Information Bureau (India) Limited (CIBIL).
Average ticket size of auto loans stood at Rs 5.12 lakh in the third quarter of 2012, as compared to Rs 4.25 lakh in the year-ago period.
While metros recorded average ticket size of Rs 6.06 lakh for auto loans in the period, the average ticket size in tier-II and tier-III cities stood at Rs 5.05 lakh and Rs 4.65 lakh respectively.
The CIBIL study also reveals that auto loans have emerged as the most enquired product in terms of credit activity led by demand particularly in tier-III cities. The number of enquiries made to CIBIL for validating credit worthiness of consumers for automobile purchases increased by 28% in the fourth quarter of last year as compared to the corresponding period in 2011.
Arun Thukral, managing director, CIBIL said, “Post the crisis in 2008, banks and financial institutions have become more cautious and have reduced their exposure to unsecure debt such as credit cards and personal loans. They are instead looking strongly at secured loans for automobiles, two-wheelers and housing.” Consequently, while the share of auto loans in credit enquiries has increased to 20% in Q4 2012 from 11% in Q4 2008, the share of credit cards has decreased to 18% from 40% in the same period.
Interestingly, despite enquiries for auto loans growing in strong double-digits in the last quarter of 2012, the number of passenger vehicles sold increased at a much slower pace by 11% to 681,000 units in the same period. Thukral explains, “CIBIL assesses credit worthiness of new loan applications but the decision to grant a loan rests with banks and financial institutions. The number of rejections may have gone up resulting in reduced sales as banks have tightened their credit policies post the financial crisis in 2008.”
A detailed study of the data shared by CIBIL also shows the number of enquiries for auto loans particularly went up from tier-III cities in the first half of 2012, compared to the year-ago period. The share of tier-III cities in all auto loan enquiries increased to 57% in H1 2012 (from 50% in H1 2010). The increase in the share of enquiries for auto loans from tier-III cities coincides with delinquency rates in such places standing at the highest at 3.2% as compared to other cities.
The share of tier-I and tier-II cities in overall auto loans’ enquiries, in the meantime, declined to 29% (from 35%) and 14% (from 16%) respectively in the same period. Among the metros, the Delhi-NCR region continued to lead the pack with 34% of all enquiries coming in from the region followed by Mumbai-Thane (17%) and Bangalore (11%).
What is also of note is applications for auto loans are being made by a younger consumer set. As much as 42% of consumers applying for auto loans were less than 35 years of age (Q3, 2012), compared to 33% in Q1 2011.
