Automobile financing

In 2007, the market of the new automobiles and the small commercial vehicles under 3.5 tons diminished by 4.5%. In the second part of the year, the declining tendency turned around and the sales figures of this period already exceeded those of the previous year. The most remarkable, nearly 20% declination can be observed in the case of micro and mini car segment, while the sports and 4WD categories showed a 40% increase. The makes showed the most remarkable decline were Dacia, Renault, Hyundai and Citroën while the sales figures of Kia, Honda and Mercedes increased by over 20%. If we look at the ranking of the makes, we can see that Volkswagen overcame Škoda, and Peugeot was left behind by Chevrolet and Renault.

On a yearly basis, the automobile financing grew by 6% owing to the growth of both the value of new cars sold and of the financing proportion of used cars as well as the increasing figures of the specific outlay.

The proportion of automobile financing continued to drop in the entire leasing market, it hardly accessed 50% in 2007.

Due to the continuously toughening market competition, more and more risky products appeared such as deferred payment, the ones where the client has to pay only the half, third, or quarter of the repayment for a set period. At the same time, because of the constantly increasing commissions paid to the car dealers, the commissions increased but the financing margins declined in this segment. During the year, the Hungarian Financial Supervisory Authority sent out a circular note to draw the company leaders’ attention to the absurd situation of the automobile financing. They emphasized the importance of the own reserve and the relation between the duration of the financing contracts and the period of use of the leased automobile, thus the appropriate proportion of the financed value and the coverage of the asset.

 This year saw a continuously increasing number of mostly automobile-related financing frauds committed by organized criminal groups. According to police records, the damage value of these crimes exceeded five billion HUF.

The Association compiled a harmonized measure package shows that is needed to step up efficiently against the unfavourable market processes. These measures include the submitted amendment to modify the lien registration, preparation of several widely available databases, establishing a fund to help police work and working out an educational material to help the clients make more reasonable credit decisions, although we suppose that the most important step would be to get the dedicated support of the government and all the market participants.

In 2008, we expect the new automobile sales figures and the financing volume to decline and the risks to continue to grow, so we emphasize the importance of the highlighted treatment of the automobile sector by the government as we suppose it has a substantial effect of the national economy.