Buckle up: Thai auto shifts gears for loan market acceler-ace-tion
Hold onto your seat belts, folks, because CIMB Thai Auto is gearing up for a high-octane comeback in the used car loan market. The subsidiary of CIMB Thai Bank (CIMBT), known for its expertise in financing pre-loved motors, has its eyes set on a market turnaround next year, fuelled by a gradual economic recovery and cooling interest rates.
Upbeat Managing Director Visit Phuengpornsawan forecasted that the used car industry, along with its loan sector, has hit rock bottom and is poised for a comeback between the first and second quarters of 2025.
“The recovery should be propelled by the continued economic rebound and lower interest rates.”
Having weathered a rough ride in 2023, CIMB Thai Auto is already showing signs of getting back in gear. The company reports increased loan volumes and improved asset quality since early 2024.
It’s aiming to lock in new loan bookings worth a jaw-dropping 12 billion baht this year, which would steer the total used car loan portfolio to a cool 31 billion baht by year’s end. The roadmap for 2025 includes a target of around 14 billion baht in new loan growth.
To turbocharge growth, the company is refining its strategy to see a significant reduction in loan rejections. The current rate of 25-30% isn’t cutting it, so they’re casting their nets on salaried folks and those boasting solid credit histories with the National Credit Bureau (NCB), Visit said.
“In the past few years, we have prioritised loan applicants with records in the NCB, increasing this segment to about 75% of our total customer portfolio.”
To steer clear of financial potholes, CIMB Thai Auto is asking for heftier down payments based on risk profiles—a part of its smart new risk management strategy to keep non-performing loans cruising below the current 1.9%.
But that’s not all, Visit announced a shift in gears towards car title loans and used motorcycle loans to diversify their lending landscape. The grand plan for the next three to four years? To ramp up outstanding loans to a staggering 38 to 40 billion baht, with 60% from used car loans and a newfound focus of 20% from both car title loans and motorbike loans.
Hot on the heels of this reshuffle, Deputy Managing Director Kriangpop Panurach revealed ambitions to corner the used motorcycle loan market, expanding its slice of the pie from a modest 5% to a hefty 20% within the next three to four years.
“There is also growing demand for car title loans as consumers look to enhance liquidity amidst an uneven economic recovery”
To keep pace with this trend, CIMB Thai Auto has recently rolled out a tempting offer on car title loans, flaunting a competitive interest rate of 9.95% per annum and a maxed-out credit line of up to 5 million baht per customer. This campaign is revved up to turbocharge new title loan growth by 3 billion baht by 2025, Bangkok Post reported.
Frequently Asked Questions
Here are some common questions asked about this news.
Why might reduced interest rates catalyze recovery in the used car loan market?
Lower interest rates can make borrowing more affordable, encouraging more consumers to finance used car purchases, thus revitalizing the market.
How does focusing on salaried individuals with NCB histories benefit CIMB Thai Auto?
Prioritizing these applicants minimizes credit risk, as they typically have stable incomes and proven creditworthiness, enhancing loan repayment reliability.
What if the demand for car title loans surpasses expectations?
Increased demand could lead to higher revenue from interest, prompting CIMB to expand its lending capacity and market presence further.
How could CIMB Thai Auto’s shift to used motorcycle loans impact its market positioning?
Diversifying into motorcycles can capture new customer segments, potentially positioning CIMB as a leading lender in this growing market.
What strategic advantages could arise from reducing the non-performing loan ratio?
Lowering the ratio improves financial health, enabling the company to offer better terms to customers and attract more business, strengthening market competitiveness.
