Value of total car loans hits nearly €300m during first quarter

Green loans — designated by the lender for purposes such as the purchase of an electric car or home efficiency upgrades — saw an increase of 22.9% in volume terms

The size of the average car loan during this time was €13,233. File picture

Irish consumers borrowed nearly €300m during the first three months of the year to buy new cars, a year-on-year increase of 14.1%, as the total value of personal loans taken out in the 12 months to March exceeds €3bn for the first time.

According to data from the Banking and Payments Federation, Ireland (BPFI) between January and March, there were 69,604 personal loan drawdowns, valued at €788m — representing an increase of 14.5% in volume and 15.3% in value year on year.

Of these, 22,366 were car loans, an increase of 14.4% compared to the same period last year, while the value hit €296m. The size of the average car loan during this time was €13,233.

While the total number and value of car loans drawn down increased significantly, there was just a small increase in the number of new cars registered during this time, up 0.15% to 64,881, which suggests many consumers opting to go to the secondary market.

The second quarter of the year saw much more activity in the new car market with new car registrations nearly 20% higher year-on-year to 20,301, according to data from the Society of Irish Motor Industry.

In terms of home improvement loans, there were 17,334 drawdowns during the first quarter, up 12.8%, with a combined value of €229m, up 15.4%. The average home improvement loan value was €13,186.

The category of “other loans” — which includes loans for education, holidays and special occasions such as weddings — saw 29,904 draw downs with a combined value of €263m — an increase of 15.7% and 16.7%, respectively. The average value for other loans was €8,799.

Green loans — which are loans designated by the lender for purposes such as the purchase of an electric car or home efficiency upgrades — saw an increase of 22.9% in volume terms of 1,882 and by 22.9% in value terms to €42.7m during the quarter. The average green loan was relatively high at €22,692.

In annualised terms, there were 281,814 personal loans drawn down in the 12 months ending March, with the annualised value exceeding €3bn.

Chief economist at the BPFI Ali Ugur said in annual terms these are the “highest volumes since the data series began in 2020, while the value of personal loan drawdowns over the same period exceeded €3bn for the first time, pointing to continued consumer confidence with many households seeking to invest in major life purchases”.

Interest rates

Since the end of March, when this data ends, the European Central Bank (ECB) has increased interest rates adding to borrowing costs for consumers. In June, it decided to increase rates by 25 basis points and while it deferred from increasing rates again last month, another rate hike is widely expected in September.

The ECB’s Governing Council is scheduled for two days of meetings between September 9 and 10.

While inflation across the eurozone has remained steady, if not elevated, with recent estimates showing the rate around 2.9%, the resumption of conflict between the US and Iran last month has once again hit energy markets.

Oil prices have come down from their most recent highs in July but are still well ahead of prices prior to the war. During July, the price of Brent crude oil — a global indicator of oil prices — surged again reaching over $100 (€84.64) a barrel.

As of Thursday, it was trading at just over $80 a barrel.

Gas prices are also down from the highs experienced last month and is now trading at €52.4 per megawatt hour. Prior to the war, prices were around €31 per megawatt hour.