The number of Australians taking out car loans has more than doubled, according to statistics released by a major comparison website.
Despite figures released this week by the Australian Bureau of Statistics showing that the number of vehicle sales dropped 1% in December 2014 compared to December 2013, comparison site finder.com.au says the number of Australians applying for a car loan through its site has more than doubled in the same time period.
Michelle Hutchison, money expert at finder.com.au, says this shows that the desire for a new car has outweighed the affordability of buying one outright for many Australians - as more consumers are opting to purchase a car using credit than to save for the expense.
“There's a real love-affair between Aussies and their cars and it's sad to say that even if people can't afford one, they will buy one using credit such as a car loan."
What’s more concerning, says Hutchison, is that the number of car loans is expected to increase as the cost of petrol has fallen, which could leave consumers in trouble when the market corrects.
“The problem here is that interest rates are expected to rise this year, which means the days of cheap borrowing and lower living expenses are fading fast.”
previously reported recent research by IBISWorld which said that car financing is growing at a faster rate than any other form of finance and is expected to continue this trajectory in 2015, due to low interest rates and rising house prices.
“Rising house prices have enabled many mortgage holders to refinance and release more of the equity in their homes. This has encouraged households to spend on one-off big-ticket items, such as new cars, despite broader concerns about incomes and cashflow,” IBISWorld industry analyst Andrei Ivanov said.
“It may seem incongruous for consumers to make such purchases while being budget-conscious with day-to-day expenditure, but the fact that funds are readily available when refinancing – and at attractive interest rates – is motivation enough for many,” said Mr Ivanov.