The rate of Vietnamese customers loaning from banks to buy cars is commonly at 30-40%, while in developed countries this figure can be more than 80%.

According to the General Statistics Office, the per capita GDP of Vietnam in 2022 is 6.7 million VND/month. That means it takes more than 4 years for the average-income person to buy a car. The high value of cars causes purchasing a car through financial and banking services to become an unfamiliar consumption habit, unlike in European and American countries.

In Vietnam, depending on the brand, car model, region, the number of customers choosing to buy installments is different. Below are the average data of some car companies in Vietnam in 2022, collected by VnExpress.

Low installment rates

The rate of car loans of Vietnamese customers is low compared to developed markets. According to statistics of Bankrate, a well-known consumer financial services company in the US, in 2022, up to 80.9% of customers in the United States buy cars through banking and financial services. In 2021, it was even higher at 85,3%. In Germany, according to the DAT Report 2022 (Deutsche Automobil Treuhand), 66% of customers buy new cars through a bank loan or a dealer loan.

According to sales experts, the ease of borrowing and paying interest to buy a car is the main factor affecting the purchase decision. Interest rates on car loans in Vietnam fluctuate according to deposit rates, so they fluctuate strongly, currently at about 8.5% or more. In the US, according to Bankrate’s summary, this figure is about 6%. However, the amount of money that Americans have to pay for the same car model compared to the Vietnamese is only one third, while the income is many times higher, because debt repayment pressure is much smaller.

Currently, banks lend 70-80%, even 100% of the car’s value. However, low interest rates are often only preferential in the first time. So, in the later time, customers have to make heavy initial payments, especially those who buy cars for the purpose of transporting goods and people. Many borrowers can’t pay by the due date, suffering from bad debt. They will then be forfeited by the bank by confiscating the car. This is the reason why most Vietnamese are still hesitant to buy a car on installments, according to banking and car sales experts.

The percentage of car buyers on installment payments also varies by geographic region. There are no specific statistics, but representatives of brands said that customers in the South often borrow more from banks than in the North. Shopping habits and lifestyle characteristics of each region make a difference in the rate of car purchase in installments of the two regions.

For the used car segment alone, the percentage of customers who buy directly or pay in installments through banks is not fully reported because most transactions are between car owners and buyers.

Difficulty in loaning for 2023

The benefit of buying a car on installment is that consumers do not need to worry about a large initial amount, and at the same time can save financial resources to use for other profitable investment purposes. However, the risk of a consumer loan is that monthly payments (interest and principal) are a pressure on car owners to ensure a stable cash flow. At the same time, if the debt is not paid, credit score will decrease significantly in the banking system.

In 2023, experts believe that the percentage of customers who buy cars through loans will decrease because of high interest rates, narrow credit room, and significantly affected customer demand for cars. Experts and many car manufacturers predict that if the current difficulties are not resolved, loan interest rates do not decrease, the sales of the domestic auto market may decline when it has just set a record sale of more than half a million car in 2022.

“With current high interest rates, car buyers who need financial support from banks are affected the most. The demand to buy cars with this group of customers might even stop, not slows down,” said Ms. Thao Van, Head of Marketing Volkswagen Vietnam evaluated.

To stimulate consumer demand, in addition to cash discounts or accessories, brands also offer preferential interest rate support packages for customers. For example, Toyota in March offers a loan interest rate of 7.99% in the first 3 months and 9.9% in the next 6 months for Vios and Fortuner models. Mitsubishi has a 9.9% loan interest package in the first 12 months for all models.

With Volkswagen, which has the highest car purchase rate in the market, is applying a support package with 0% loan interest in the first 12 months for all models (except Touareg). Previously in February, 0% interest rate was only applied to its models in the first 6 months. “Business in the market is very slow, so we have to adjust,” – said Ms. Van.

Source: vnexpress.net