European Consumer Credit Market Contracted in First Half of 2020

The impact of the Covid-19 pandemic led to a decrease in new loan value of almost a quarter.

European consumer credit providers represented through Eurofinas granted new loans worth €184.8 billion in the first half of 2020, a decrease of -18.4% compared to the same period in 2019 according to the results of the Eurofinas Biannual Survey 2020. Total new consumer credit lending, which accounts for the majority of new Eurofinas lending (71%), experienced a drop of -21.2%.

Declines in new credit granted were observed across all personal consumption categories. Personal loans suffered the sharpest decrease of -23.2% compared to the first semester of last year. Revolving credit shrank by -17.8%, followed by non-automotive credit at the point of sale falling by -11.8%.

The consumer car lending market dropped significantly by -26.3% in the first half of 2020, with new cars performing worse than used cars. Loans for new consumer vehicles declined by -32.4%, whereas loans for used cars showed a contraction of -22.2%. There were consistent performances across markets for consumer car lending, with most experiencing double-digit drops. When it comes to the car finance market for business vehicles, used cars also outperformed new cars in the first half of this year. The former fell by -12.4% compared to the same period last year, while the latter contracted by -33.6%.

The aggregate figures reflected declines across all Eurofinas Members’ national markets, except Turkey, which is the only reporting country to experience a growth of 35% in consumer credit. By comparison, while half of the reporting countries (including Morocco, Italy, the UK, France, and Belgium) suffered from drops of more than -20% in new consumer credit lending, the other half experienced decreases of between -11% and -17%. Germany was the only significant market with new consumer credit lending contracting by less than -10%.

Growth in household consumption is expected to bounce-back in the third quarter of 2020, driven by demand and policy measures supporting household purchasing power. However, this recovery is projected to be disrupted towards the end of the year by the resurgence of the pandemic and the reintroduction of more stringent containment measures. Although private consumption is forecast to be rebound next year, consumer credit lenders will likely continue to experience some headwinds going forward.