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27 Apr 2022

Econ Digest

Auto title loans in 2022: Tapping into the low-end market… Expected to continue to grow by 15-20%

คะแนนเฉลี่ย

        Auto title loans saw high growth during the COVID-19 epidemic crisis in 2020-2021.  By the end of 2021, the number of loan accounts increased to 4.20 million accounts, with total outstanding loans up by 45% from the end of 2019 to a total of THB181 billion. Meanwhile, non-performing loans (NPLs) shot up by nearly 100% over the same period to THB2.93 billion, but the significant expansion of the credit base resulted in the NPL ratio remaining at a low 1.62%.  The high growth of auto title loans came mainly from non-bank lenders, partly due to an influx of more new operators into the market, especially those with large capital bases, and enlargement of the customer base in the low-end market that encompasses motorcycle title loans. On the other hand, commercial banks’ auto title loan business is relatively stable, and their marketing strategies still focus on passenger cars, pickup trucks and big bikes, with middle-class customers as the primary target.

        Auto title loans will continue to grow in 2022, but are expected to grow in the 15-20% range due to a high base, compared to 20.4% YoY growth in 2021, stemming from non-bank players’ proactive credit policies, increased access to credit, increasing credit limits and special interest rates, as well as high demand for auto loans. Meanwhile, auto title loans in the Thai banking system will remain stable, but due mainly to the slowdown in car ownership during the COVID-19 crisis, some lessees have filed for debt moratoriums, debt extensions and debt restructuring measures, resulting in fewer lien-free cars entering the system.

        While the auto title loan interest rates in 2022 have risen, they remain close to the previous year. This is due to the fierce competition among service providers and the high and widely varying interest rates on the auto title loans as compared to the average cost of funds, risks and return of other personal consumer loan products. The annual interest rates of auto title loans range from 10-24%, depending on the type of vehicle, the occupation and financial situation of the borrower, as well as the type of service provider. The growth of auto title loans will provide retail customers, especially individuals with irregular income and groups struggling to make ends meet, with improved access to formal loans. At the same time, it is also important to be concerned about the potential risks in the event of future events that could cause disruptions to the economic recovery.

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Econ Digest