Yesterday, I was chatting with a friend about my plan to buy a car. Out of nowhere, he gave me a quirky but surprisingly logical suggestion:
"
Go for a used car! Look for one with low mileage, barely used, and in great condition. No matter how shiny it is, it's still a used car, and the price is way cheaper. You'll get more bang for your buck, bro!"
That casual chat got me thinking, there’s a good reason why used vehicle financing remains strong, growing
14.6% yoy.
It turns out that many people are now turning to used cars as a more
budget friendly option, especially with the current economic pressures making consumers more cautious about big spending.
According to my friend, buying a used car isn’t just about saving money, it’s a smart move in uncertain economic times.
But not all news about the rising trend of used cars is good. With second hand vehicles flying off the shelves, new car sales have taken a hit,
dropping by as much as 15% yoy.
Meanwhile, motorcycle sales are still growing but just barely,
up by only 3.4% yoy. As a result, new vehicle financing has only grown
8.5% yoy as of October 2024.
The domino effect has also hit the multifinance industry. Growth in financing slowed to
7.3% yoy in November 2024, down from 8.4% the previous month.
Looking at the numbers, total multifinance loans now stand at
IDR 501.4 tn, a solid figure, but the slowdown is evident.
For 2025, there’s a sliver of hope. New car sales are projected to grow moderately by around
5%, reaching 900,000 units.
But it won’t be a smooth ride. Challenges like
higher VAT, regional tax hikes, and stagnant middle class income levels are likely to weigh heavily on the market.
That’s why multifinance growth is expected to remain steady at around
7%-8% next year.
Another headwind for the sector is the slightly rising NPF ratio, now at
2.71% as of November 2024.
The root of the problem lies in weaker purchasing power due to
high food and energy inflation, along with layoffs in labor intensive industries, which have squeezed incomes for lower income groups.
As a result, more borrowers are starting to struggle with their loan repayments.
To navigate these economic pressures,
multifinance companies are tightening their credit approval processes to maintain healthy asset quality.
This is evident in the still high
CoC of 5.1% as of October 2024.
In addition, these companies are bolstering their reserve ratios to
197% to cushion against potential credit losses.
However, in these challenging times,
multifinance sector seems to be losing a strong growth driver, especially from the automotive segment.
As a result, recommendation for the sector has been downgraded to
neutral. Rising asset quality risks and increasingly tight funding needs are additional reasons why this sector requires extra caution and strategy.
That said, one player still stands out:
BFIN.
The company continues to demonstrate resilience, especially through its NDF product, which now accounts for nearly 70% of its total portfolio.
On top of that, BFIN has consistently delivered the highest ROE in the industry, averaging 20% over the past five years.
So, if you’re looking for the most promising name in the sector, BFIN remains the top pick.
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