Surge in car loans being taken out despite cost-of-living crisis
2:17
Surge in borrowing to buy new cars
Charlie Weston
Thu 9 Nov 2023 at 02:30
There has been a massive jump in the number of loans taken out to buy cars.
Close to 16,000 loans to purchase vehicles were taken out in the April-to-June period. This is a jump of 36pc when compared with the same three-month period last year, according to the Banking and Payments Federation.
It is the highest level of borrowing to buy vehicles since banks started recording the data in 2020.
But the actual level of debt to buy cars is much higher, as the banks’ data excludes finance deals provided by car sales firms, hire purchase and leasing deals.
The surge in bank lending to buy expensive new cars shows that some people have managed to escape the impact of the cost-of-living crisis, which has seen energy prices, food costs and mortgage rates jump.
Household savings are at record highs of €153bn, with record numbers travelling through Dublin Airport.
However, others are struggling to put food on the table due to runaway inflation.
The banks said the value of the car loans jumped by almost 50pc in the second quarter to €189m.
An additional €1,000 is being borrowed to buy cars compared with last year, with the average car loan now close to €12,000.
Many of the loans are for new electric vehicles.
Overall, the total value of personal loan drawdowns reached a record high of €539m in the April-to-June period. This is also the highest level since the data series began in 2020.
Some 56,400 personal loans were taken out in the second three months of the year. This is up by almost a third in the year.
The data includes AIB, Avant Money, Bank of Ireland, KBC Bank Ireland (up to February this year) and Permanent TSB, but not the credit unions.
Home-improvement loans have also shown huge growth.
Some 15,800 loans for works on homes were taken out in the three-month period, a rise of 27pc on the figures recorded for the second quarter of last year.
An average value for home-improvement loans was recorded at around €11,000.
By value, these loans amounted to €172m, a rise of 22pc on last year.
A total of 24,746 loans for other purposes, including education, holidays and special occasions such as weddings, were drawn down.
This is a rise of 22.5pc on last year, with values also rising by 22.6pc to €178m over the same period.
There has been a big rise in so-called green loans. This is where consumers borrow to carry out works such as improving the insulation of their home or installing solar panels.
The value of green personal loans rose to €29m in the second quarter of this year.
This is an increase of 174.6pc in the year.
Some 1,250 green loans were taken out, a rise of 138pc on last year.
Banking and Payments Federation Ireland chief executive Brian Hayes said the figures were showing a continued upswing in personal loan drawdowns.
“We can see in particular a significant jump of almost 50pc in the value of car loans year-on-year to €189m, as well as an increase of over 35pc in volumes to 15,828 loans,” he said.
Mr Hayes said the average car loan increased by €955 to €11,922.
