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Car loans on the rise as car sales boom in Australia

Car loans on the rise as car sales boom in Australia

After months of being in lockdown thanks to COVID-19 restrictions, more Aussies than before are determined to hit the road with a new set of wheels.

The latest Australian Bureau of Statistics (ABS) figures show that car finance loan commitments increased 4.7 per cent in May 2021 (seasonally adjusted). This has seen the total value of new loan commitments for May 2021 grow to $1.296 billion.

Between February 2020 and April 2020, the value of new vehicle commitments plunged from $1.151 billion to $629 million. This is unsurprising as it mirrors the impact of COVID-19 on the Australian economy.

The value of new loan commitments seen in May 2021 may reflect the continued recovery and economic growth of Australia. While it is still down from its March 2016 peak of $1.355 billion, it’s closing the gap.

Meanwhile, the latest figures from the Federal Chamber of Automotive Industries (FCAI) show strong results for new vehicle sales in June. 110,664 sales were recorded in the month alone, an increase of 0.4 per cent year-on-year.

The first six months of 2021 have also reflected Australia’s renewed love affair with their four wheels, as it saw sales results grow by 28.3 per cent compared to the same period in 2020. New vehicle sales climbed to 567,468 in the first six months of 2021, compared to 442,415 for the first six months of 2020.

Toyota was the market leader for June (21,076 sales), followed by Mazda (12,225 sales), Ford (8,456 sales), Kia (7,890 sales), and Hyundai (7,357 sales).

In terms of the best-selling vehicles for June, the Ford Ranger came out on top (6,058), followed by the Toyota HiLux (5,412), Isuzu Ute D-Max (3,167), Mazda CX-5 (3,018) and the Kia Cerato (2,711).

Federal Chamber of Automotive Industries Chief Executive, Tony Weber, said the June result was “consistent with buying patterns usually recorded at this time of year”.

“Expectations for a strong result in June had remained high given the traditional end of financial year demand from business and private buyers driven by Government incentives, such as the extension of the depreciation allowance announced in the Federal budget coupled with intensive marketing activity from vehicle brands,” he said.

“In spite of some states being forced into COVID-19 lockdowns towards the end of June, the acquisition of a new vehicle remains a popular option for buyers across all market segments.”

“The delivery challenges caused by microprocessor shortages and bottlenecks in the supply chain are yet to be fully resolved, however, all parties are continuing to find ways to meet the strong demand for customers across all sectors,” he said.

Considering taking out a car loan to purchase your new set of wheels? There’s more to consider than just the interest rate. Take stock of what fees, if any, the provider may charge, as well as whether they offer features like the ability to make extra repayments or offer a redraw facility.

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This article was reviewed by Personal Finance Editor Georgia Brown before it was published as part of RateCity's Fact Check process.

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