This background paper provides information about car financing in Australia, including the range of participants and their relationship to car dealers, the relative market share of various participants, the size of the sector and the profitability of the sector. This paper has been prepared (and charts have been constructed) using public information.
This paper illustrates the following key points.
a) Indicatively, 90% of all car sales are arranged through finance, of which around 39% are financed through a dealership and around 61% are financed from other sources.
b) In the December quarter 2017, car loan payments were the largest vehicle-related expense for the ‘hypothetical household’ in both capital cities and regional areas, with repayments larger than weekly fuel costs.
c) In 2017, new finance commitments for motor vehicles were around $35.7 billion, equivalent to around 4.2% of all new finance commitments in 2017.
d) In 2017, finance commitments for motor vehicles were the equivalent of around 2.0% of nominal GDP, similar to its share in 2007.
e) Over the past 10 years there has been an increase in financing for new motor vehicles and a decrease in financing for used motor vehicles.
f) Profit margins for car dealers rely not only on car sales, but on ancillary services, including the sale of finance and insurance.
g) Delinquency rates for motor vehicle loans have increased since 2012, but remain at low levels.