Auto hire-purchase lending is likely to remain flat in the second half of 2025 despite falling interest rates and competitive new car pricing, says Tris Rating, citing cautious lending practices, weak consumer purchasing power, a glut of used cars and limited truck demand.
According to Tris, hire-purchase loans across all vehicle categories declined throughout 2024 and into the first six months of 2025, though passenger cars showed early recovery signs driven by competitive used car pricing and growing hybrid electric vehicle (HEV) demand as consumers shift towards sustainable options.
“Auto hire-purchase lending will likely remain flat in the latter half despite favourable conditions, including supportive regulations, competitive new car pricing, motorcycle market normalisation, and falling interest rates,” the credit rating agency said in a recent report.
Some positive momentum is expected for used cars and HEVs, but “broader stagnation will persist” due to used car oversupply, weak consumer purchasing power, limited truck demand, and cautious lending practices, added Tris.
Motorcycle hire-purchase is the only segment showing a clear recovery following stricter credit standards, with most companies reporting declining non-performing loan (NPL) ratios. Market conditions have stabilised as a result of reduced loan-to-value ratios and dealer commissions.
“Still, lenders remain cautious, now requiring down payments or upfront instalments for customers with weaker credit,” noted Tris.
“The truck leasing outlook remains challenging given economic weakness. Most lenders show declining NPL ratios since the first quarter, though aggregate data remains elevated.”
Credit costs dropped in the first quarter, then rebounded in the second quarter along with increased write-offs. However, losses from repossessions declined as fewer truck repossessions improved resale prices.
New car hire-purchase portfolios from six captive finance companies in Tris’s database showed improving trends, with declining average NPL ratios due to conservative lending.
“Conversely, used car non-bank financial institution [NBFI] lenders still face ongoing challenges with elevated and volatile NPL ratios, rebounding in the second quarter after declining in the first three months,” noted the agency.
Commercial banks with auto hire-purchase exposure saw mixed trends. Some reported rising NPL ratios from portfolio contractions with modestly higher absolute NPLs, while others recorded declining NPL ratios alongside portfolio reductions, according to Tris.
Government debt relief programmes, including “You Fight, We Help”, have provided modest NPL stabilising support for banks and their subsidiaries so far.
Despite challenging market conditions, a positive trend was lower losses from repossessed vehicles based on recovering used car prices, said the agency.
Meanwhile, the Bank of Thailand plans to directly supervise the auto hire-purchase and leasing business, aiming to enhance market conduct to improve consumer protection and industry practices. The new regulation is due to take effect 180 days from the date of publication, on Dec 2, 2025.
“While these supervisory measures may slow loan growth and increase compliance costs, the overall impact is expected to be contained,” Tris said.
The Finance Ministry is expanding the Thai Credit Guarantee Corporation’s coverage, allowing it to guarantee loans from NBFIs not owned by traditional financial institutions.
However, Tris does not expect NBFIs to actively expand loan portfolios via the guarantees.