Market Trends of Indonesia Used Car Financing Industry
Sport Utility Vehicles Dominating the Market
SUVs have become more popular among Indonesian used car buyers in recent years. Consumers are fascinated by the current SUV models, and dealers participate in offering new SUVs for the growing market. The SUV trend among the youth may be the compelling force for the SUV segment among domestic buyers.
In this situation, SUVs with expensive and sporty appearances generally cater to the higher income groups while offering reasonable comfort.
SUVs offer more fantastic deals to customers who have these concerns. Even for a low budget, a low-cost SUV provides the vision of a compelling and newest vehicle. The SUV segment provides good value for money in the middle-income group economy.
The emergence of sub-compact SUVs has also offered many possibilities to dealers as these models come with both performance and budget. Some of the top-selling SUV models include the Honda BR-V, Suzuki SX4 S-Cross, Daihatsu Terios, Toyota Rush, Chevrolet Trax, and DFSK Glory 580.
According to OLX Autos Indonesia's statistics, the trend of used car sales from MPV to SUV has been observed in recent years. Although MPVs stayed the top choice in the automotive and used car segment till 2019. However, by 2022, SUVs took over the market share, which climbed by 31% from the previous 25%.
During the forecast period, used car sales will shift from cars capable of transporting many passengers, like multi-purpose vehicles (MPV), to sport utility vehicles (SUVs). This shift is attributed to improved road infrastructure, leading consumers to prefer SUVs when traveling to different places.
Full-sized SUVs, such as the Toyota Fortuner and Honda CR-V, can be purchased for much less in the used vehicle market, around USD 0.025 to 0.030 million (Rp 400-500 million). The BMW X-series, Audi Q-series, Mercedes G-series, and Volvo XC-series are among the most popular SUVs in the luxury and premium classes, with the BMW X-series, Audi Q-series, Mercedes G-series, and Volvo XC-series among the most popular.
With the developments mentioned across the country, the demand for used sport utility vehicles is expected to grow over the coming years.
Banks Expected to Dominate the Market
Banks and financial organizations often charge higher interest rates for used car loans than new ones. This is because used cars are more likely to be damaged, which increases the risk for the lender. As a result, the interest rates for used car loans are typically higher than those for new car loans.
Even though the interest rate for financing a used car may seem high initially, it is essential to consider that the monthly payments can be significantly lower than those for a new car. This is because the cost of secondhand cars is generally lower than that of brand-new vehicles. By opting for a used car loan, one can benefit from owning a car while controlling monthly expenses.
Banks have a strong presence in the used car market due to their well-regulated nature and reliable financing options. The top players in the market include Bank Central Asia (BCA), Bank Mandiri, Bank Rakyat Indonesia (BRI), Bank Negara Indonesia (BNI), CIMB, and Bank Danamon Indonesia.
Most banks in Indonesia provide loans to purchase pre-owned/used vehicles. The terms, conditions, and charges differ from one lender to the next. Selected lenders may offer up to 100% financing, while most provide up to 80%.
Typical parameters for a car loan may include the following: up to 70-75% of the used car price as the loan amount, a payment period of up to five years, approval within three to seven days, and an interest rate of 8.5% to 9.5% when using bank financing.
Since the loan amount for used car loans is also determined by the lender's valuation of the used car, the loan amount may be notably lower than the price quoted by the seller. Also, while used car loan terms can be as long as five years, the final term will be determined by the age of the vehicle.
Many private banks in the country are partnering with used car marketplaces to offer auto-financing services by leveraging the platform's used car sales. For instance,
- In May 2022, the Indonesian division of used automotive marketplace Carsome signed an agreement with Indonesian Bank Jago Tbk for automotive financing to support Carsome Indonesia's business that focuses on buying and selling used cars online.
Owing to such developments across the country, the demand for used cars is expected to grow over the coming years.
