The vehicle-finance market is the only segment where delinquencies continue to rise, according to the latest information published by credit bureau Transunion.

This could indicate that the country’s big four banks, which dominate the market with  more than 97% market share, may have extended credit less carefully than planned, and more pain is likely to follow in future results.

This was revealed in Transunion’s inaugural insights report, which published data for the September quarter, showing that consumers who missed three or more successive payments on their vehicles had increased by 50 basis points to 4.1% by value versus the same quarter a year ago.

This means that  about R17bn of the R414bn vehicle and asset finance (VAF) book is delinquent, or nonperforming.  

“This is consistent with the trend we have seen over the last two years in which delinquency rates have risen in vehicle finance. Rather surprisingly, given the tough economic climate, it is the only market (where) we have seen an increase in delinquency rates,” says Carmen Williams, director of financial services research and consulting at Transunion SA.

The credit bureau accesses data relating to 23-million consumer credit accounts through the SA  Credit and Risk Reporting Association (Saccra). All authorised banks and lenders are obliged to register and provide data on credit accounts to Saccra.

The Vehicle and Asset Finance (VAF) segment specifically relates to credit extended to consumers for passenger and light commercial vehicles, including taxis. It is the second largest consumer credit market behind that of home loans, which is about twice the size.

Williams says the rising delinquencies come at a time when new business volumes were declining. When compared to the same period a year ago (Q3 2018 vs Q3 2017) the amount of new credit extended by value was largely flat, but the number of new accounts  activated decreased  3.7%.

SA’s big four banks, which dominate the market for vehicle finance, seemed to reflect these views in their most recent results. Wesbank, the vehicle financing division of Firstrand, and the largest lender by market share, reported an earnings decline of 16% in the segment for the year to  June. The company cited problems with customer behaviour in repossessions as a contributing factor. It also stated that “lower risk appetite” had resulted in lower new unit volumes.

“It is very difficult to pinpoint the exact reasons behind the increase in VAF delinquencies. It could also be that lenders, historically, applied less stringent credit granting criteria than they do now, and as such may have granted loans to consumers who were in higher risk categories. 

“The fact that new originations declined by 4% year-on-year could be driven by tighter lending criteria which may be in response to a rise in delinquencies,” says Williams.