More new cars, more unpaid debt

There reportedly has been a 477.6-per-cent increase in the number of vehicles sold in Thailand, and there might be concern over a return to the days of non-performing loans (NPLs) that we saw in 2000 and before.

Reportedly, in November, passenger car sales were up 509.9 per cent and one-tonne pickup sales up 621.2 per cent on the year. Based on this, it can be assumed that there will also be a more than 477-per-cent increase in vehicle repossessions, especially considering the government's first-car-buyer scheme.

This is how vehicle repossession generally works: the auto owner stops making payments, so the bank or lender hires a collection agency if other efforts fail. The vehicle, if found, is transported to a storage facility until it can be resold, usually at a price much lower than is owed on the loan. I assume that is how it generally works in Thailand.

As you can see, the bank or lender pays to get the repossessed vehicle back, and on top of that also takes a loss from the sale of the repossessed vehicle. A complete loss, plus the cost of hiring a collection agency, occurs for vehicles that are not found.

There should be some assurances from the government and from lenders that a probable increase in NPLs due to abandoned vehicle loans has been taken into account.

Guy Baker

Bangkok