Increase in Commercial Vehicle loan defaults

These days when most people buy a commercial vehicle they use some sort of finance plan or bank loan in order to afford the vehicle, as due to the economic climate it is extremely difficult for most people to pay for a new vehicle outright. Most commercial vehicle dealerships therefore offer a variety of competitive finance packages for their customers; however it seems that even with this help many are still struggling to pay for their new vehicle.

It has been reported today by Crisil Research that the amount of people defaulting on their commercial vehicle loans has increased dramatically so that the repayment record in the segment is now at its worst in over three years. Discussing the findings, the agency said in a statement: “Delinquencies in commercial vehicle (CV) loans are increasing, with monthly collection ratio (MCR) of Crisil-rated CV pools dropping below 95% for the first time since 2009.” The agency also warned that there is “a likelihood of an increase in non-performing assets (NPAs) over the next few quarters”, but that “the other segments like housing loans, car loans and microfinance loans remain stable.”

Furthermore, senior director of Crisil Research, Pawan Agrawal, said: “A portfolio analysis of leading non-banking finance companies (NBFCs) that lend to the CV segment reveals that delinquency in near-term buckets is rising. The sub-par collection levels will continue over the next few quarters as transporters face sub-par collections on account of a reduced freight demand and inability to pass on the fuel and labour inflations. Delinquencies are likely to gradually deepen more and more beyond the 180 days, leading to a potential rise in NPAs.” Falling into arrears is bad enough when it comes to individual commercial vehicle owners; however it is even worse for fleet managers, especially if they default on multiple finance deals.

This will also come as a concern to others that depend on the commercial vehicle industry such as commercial vehicle insurance providers; as if defaults in finance payments are on the rise it most certainly means that these companies will also start to see more missed payments. It is therefore important for those that are planning on buying a new commercial vehicle to make sure that they budget properly before considering taking out a finance package, and include additional costs such as repairs and an increase in fuel prices so that they do not find themselves struggling with their loan repayments.

Leave a Reply

Your email address will not be published. Required fields are marked *