Consumer credit: LOA is becoming a very popular product

If activity is at half mast for consumer credit, the auto market as well as the LOA are essential growth engines in 2019. The beginning of 2019 seems not to be bearing fruit for consumer credit. Activity during the period between December and February actually decreased by 0.5% over one year. The month of December saw the most significant fall with -4.6% and followed by -0.2% in January. A decrease that February’s production failed to offset despite the good 3.6% increase in February. The sector shows all the more its relative disappointment that the production of stocks had regained an annual progression upwards during the last 4 consecutive years according to the figures provided by the French Association of financial companies (ASF). Futher reading at buhaudit.org

 

The personal loan in decline

The personal loan in decline

In this case, it is the personal loan which suffered from a sharp slowdown of -3% over the first two months in 2019 while the product considerably supported the growth of the consumer credit activity. As a reminder, this type of loan is said to be unaffected. This means that the borrower can use the credit money as he sees fit. This flexibility is nevertheless authorized in exchange for an interest rate generally higher than a consumer credit allocated to a project specified to the lender.

 

Leasing boosts new vehicle market

vehicle market

Conversely, consumer loans to buy a used vehicle continue to grow. The demand was extremely strong in February with an increase in demand of 15.1%. This also applies to the credit intended for the acquisition of capital goods, up 15.8% in February.

But if there is one product that pulls the market up, it is indeed rental with option to buy (LOA). At the start of 2019, the LOA even holds a large majority in the financing of new vehicles with a share of 520 million dollars in February, while conventional auto credit represents only 182 million dollars.

It must be said that the French are won over by leasing. Rather than buying a new or used automobile entirely, more and more people are resorting to leasing. Concretely, the tenant pays rent to the professional who remains the owner of the vehicle unless the purchase option is exercised. If the beneficiary nevertheless decides not to activate the option, the vehicle will then be returned once the rental contract ends. However, this practice is almost like a regular loan since the rent paid each month is similar to a monthly loan. A fact verified by the fact that the organizations expert in grouping of credits are able to include an LOA in a repurchase of credit.

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