Bad Car Loans Stack Up in Thailand as Economy Flatlines

[Big Boy]

Thailand’s auto lenders have repossessed three times as many cars as they did a year ago as defaults soar in a flat-lining economy.

The souring auto loans, accounting for a quarter of consumer borrowing, illustrate the growing debt burden shouldered by Thai households.

That is bad news for Thailand’s military government, which is trying to pull the economy away from the edge as the country’s key exports sputter.

With household debt rising to the equivalent of more than 80 percent of the country’s total output, Thai consumers simply do not have deep enough pockets to spend the country out of stagnation.

Leasing firms said bad auto loans had jumped 20-30 percent this year, and were likely to hit 3 percent of total loans. Small and medium-sized banks are the most exposed.

Full story: Chiang Rai Times

Thoughts: this doesn't surprise me whatsoever, and actually goes a long way to answering my own suspicions.

I've noticed in 2.5 years of living here that in the beginning, if we were having work done on the house, workmen turned up on a motorcycle. These days, most turn up in their own pick-up.

Several of my extended family (all claiming to be poor/receiving no financial assistance from me) now have their own cars. When we first arrived, they couldn't afford their own bus fare home. For example, my son-in-law turned up in his brand new Toyota about 2 months ago. Repayments are stupid.

All of this debt has to backfire soon, as it did in the West a few years ago.

[dtaai-maai]

I've always understood this to be a problem, yet prices for 2nd hand vehicles remain astonishingly high. If the problem is getting worse, I wonder if this will begin to have a knock-on effect. If not, why not?

[Dannie Boy]

I've always understood this to be a problem, yet prices for 2nd hand vehicles remain astonishingly high. If the problem is getting worse, I wonder if this will begin to have a knock-on effect. If not, why not?

In the short term maybe, but in the longer term with reduced supply of 2nd hand vehicles, the prices could even go up?

[dtaai-maai]

I was assuming that the repossessed cars would be entering the 2nd hand market, probably at auction. Is that not the case?

[Dannie Boy]

I was assuming that the repossessed cars would be entering the 2nd hand market, probably at auction. Is that not the case?

I would think so too, which is what prompted me to agree that in the short term prices might fall, but if people stop taking out loans for new cars then in the medium-long term the supply of 2nd hand cars will reduce, pushing the prices back up.

[Nereus]

The same article is in the Bangkok Post:

http://www.bangkokpost.com/business/new ... -more-debt

.......................As banks sell seized cars that they have seized, used car prices have fallen 20-30%, Tisco's Sakchai said, compounding losses for loan providers....................

[theprice01]

I know 4 or 5 Thais who have new cars, i think its completely pointless, all for show once again.
The monthly repayments some of them make is 75% of their pay .

My friends in England were the same, they'd chuckle at my 1999 Ford KA, but at least i owned it!

[PeteC]

It doesn't mention the previous government's new car purchase program for lower income people. I think that was just help with the down payment but the person (probably not financially qualified) had to take a loan for the rest and keep the car for 5 years. I'm thinking those cars and people are a big part of the defaults now. Pete

[barrys]

It doesn't mention the previous government's new car purchase program for lower income people. I think that was just help with the down payment but the person (probably not financially qualified) had to take a loan for the rest and keep the car for 5 years. I'm thinking those cars and people are a big part of the defaults now. Pete

It was actually a scheme for first-time buyers - they were entitled to a refund of the excise duty after one year up to a maximum of 100,000 baht for so-called eco-cars not exceeding 1500 cc. It did cause a massive increase in car sales on credit and, you're right, that the cause of a large part of the defaults now.

[PeteC]

It doesn't mention the previous government's new car purchase program for lower income people. I think that was just help with the down payment but the person (probably not financially qualified) had to take a loan for the rest and keep the car for 5 years. I'm thinking those cars and people are a big part of the defaults now. Pete

It was actually a scheme for first-time buyers - they were entitled to a refund of the excise duty after one year up to a maximum of 100,000 baht for so-called eco-cars not exceeding 1500 cc. It did cause a massive increase in car sales on credit and, you're right, that the cause of a large part of the defaults now.

I wonder if the up to 100k refund after a year was linked to go directly to the bank as loan repayment, or into the car owners pocket?. I'm thinking the latter.

[barrys]

I wonder if the up to 100k refund after a year was linked to go directly to the bank as loan repayment, or into the car owners pocket?. I'm thinking the latter.

Yes, you're right - it was paid to the car owner, that's what made it so popular!

[theprice01]

it seems a bit of an odd system. I think the £2000 scrapage scheme in England was a better way of doing it.

[Spitfire]

Not surprised either with this really as when you have this cultural thirst for show/face with people that simply don't earn enough and add totally irresponsible lending by the high street banks to people that anywhere else would never qualify for a loan.......asking for it really.

The age old problem of people living way beyond their means and not caring as only the 'now' is important. Whatever happened to saving up for things before you buy them? I remember saving up for my first car when I was 18 (1000 pounds).

I even saw someone the other day in Tesco buying a toaster on monthly payment and the cost of the toaster was 700 baht........facepalm.

If the economy and currency goes south then I'm happy with that (as that means more money for me) but they only have themselves to blame for it.

[JamesWest]

i was amazed at all the brand new pick up trucks up north two years ago. everybody had one...

[GLCQuantum]

The majority of the Thai population are very much like myself with money. They buy things that they don't need, they borrow for something they don't need on an interest stacked repayment method and they rarely look far into the future when making a large purchase.

The difference is, I don't have any responsibilities as such like taking care of a wife, girlfriend, family or children. Most of them do.

In comparison to the average wage in Thailand, I would think the borrowing of money, or purchasing of items on a long monthly payment basis, is quite shocking.

It's only a matter of time before this becomes a big problem imo.