Vehicle Financing Remains Far from Pre-Pandemic Levels: AMDA
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Vehicle Financing Remains Far from Pre-Pandemic Levels: AMDA

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Antonio Gozain By Antonio Gozain | Senior Journalist and Industry Analyst - Tue, 02/01/2022 - 14:34

New vehicle financing is slowly recovering but remains far from pre-pandemic levels due to Mexico’s economic stagnation and the legalization of “chocolate” cars, impacting sales across the country, said industry experts.

“The greatest limitation comes from the weakness of demand in terms of credit requirements, due to the impact that the economic crisis has on consumers’ purchasing power and debt capacity. What we will be facing in the coming months and years will basically be related to this condition," said Guillermo Rosales, President, AMDA, in a press conference.

Financing plays a key role in new vehicle sales in the Mexican market. From the total units sold in 2021, 58.1 percent were purchased through financing, either from a bank or directly with OEMs’ financial institutions, said Rosales. While new vehicle financing increased by 4.5 percent in 2021 when compared with 2020, it is still 22.7 percent below the levels reported in 2019, he added.

In addition, President Andrés Manuel López Obrador’s “chocolate” car legalization decree in 10 states will be an “inhibitor” for new vehicle financing, said Eric Ramírez, Managing Director for Latin America, Urban Science. The impact of the decree will be seen in the medium term, since it will reduce second-hand cars’ value by 20 to 30 percent, he added. “If people want to sell their vehicles with the goal to start financing a new one, now they will want to wait longer.”

Although there is strong competition between players in the financing sector, it is not enough to boost sales, said Rosales. In 2021, from the total vehicles purchased through financing, 79 percent were granted by in-house OEMs’ captive financial institutions and 21 percent by banks, pointed Gerardo San Román, Head of Latin America, JATO Dynamics.

When asked about Citibanamex’s sale, San Román said that it will not unbalance banks’ participation in the segment, since Banorte, Scotiabank and BBVA hold the largest market share.

Greater Dynamism in 15 States

During 2021, Baja California, Sonora, Coahuila, Nuevo Leon, Tamaulipas, Sinaloa, San Luis Potosi, Aguascalientes, Queretaro, Mexico City, Colima, Puebla, Veracruz, Chiapas and Yucatan stood out in the financing segment, with over 70 percent of the total new vehicle sales being completed through financing, reported El Universal.

Some of these states exceeded the country’s 58.1-percent average due to the interest in subcompact and compact models, while pickups boosted figures in states where infrastructure projects, such as the Mayan Train, are being carried out by the federal government, said Ramírez.

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