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Consumer credit led by automotive market outlook

Demand for credit to finance a motor vehicle is expected to slow down in 2019.

Demand for credit to finance a motor vehicle is expected to slow down in 2019.

The decrease in transactions over the last few months

The decrease in transactions over the last few months

The automotive market is an inseparable part of the vitality of consumer credit. In fact, most consumers tend to use the loan to finance the acquisition of a new or used vehicle. A sharp decline in the outstanding amount of personal credit may be a sign of a poor pass in the activity of the motor vehicle sector. And worries begin to spring up among financial professionals as sales seem to be drastically reduced in Europe. Yet this turnaround follows an uninterrupted growth of five successive years.

The federation of automobile manufacturers puts forward statistics that are, to say the least, eloquent. During the month of September, registrations of new cars would have declined by 23.5% over one year. The drastic decline also continued in October with a fall of 7.3% and in November with a decline of 8%.

On the French territory, the situation seems to be much less alarming according to the remarks made by the automobile manufacturers. The market would have even increased by 3% in 2018, but the sharp reduction in the number of transactions of 14.5% at the end of December forces the players to remain attentive.

Banks could suffer the trend of the market

Banks could suffer the trend of the market

Now, players offering financing opportunities, such as banking institutions, do not hide their fears about market trends. In particular, there is a strong correlation between the sale of vehicles and the purchase of consumer credit. Households usually pay a purchase in this way by borrowing instead of paying by cash. And according to a study by a financial professional, a decline of around 3 to 4% would be expected in the number of vehicle sales. However, the market propensity in the outstanding consumer credit is around 40%.

These gloomy prospects are particularly hurting banks. They themselves are experiencing a difficult phase in terms of profitability. As it stands, consumer credit offers them a satisfactory margin in the context of low-interest rates for mortgages. Home loan financing is even putting pressure on its profitability. A weakening of the demand for personal credit following a decline in the number of vehicle purchases would, therefore, be a real blow.

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