According to data from the banking federation, Febelfin, analyzed by newspaper De Tijd, anyone borrowing money for a new car today takes out an average loan of €23,750. That’s €8,250 or 53% more than ten years ago. A similar trend is evident in the purchase of used cars.

While ten years ago the average borrowing for a used car was €10,900, today it’s €17,550. That’s over €6,650 or 61% more. The term of a consumer loan for a new car is usually four to five years; for a used car, this period is generally shorter.

Affordability under pressure

Remarkably, loan amounts have increased by 53%. In comparison, car prices themselves have ‘only’ increased by 36%, meaning that consumers – whether out of necessity or not – are borrowing a larger share of the car’s purchase price. This, in turn, could indicate that the affordability of cars is under pressure.

It is also possible that customers opt for more expensive cars, such as SUVs or electric vehicles. “Cars have indeed become more expensive,” agrees Christophe Dubon of Febiac. “On the one hand, this is due to rising raw material prices, and on the other, it’s due to the increasingly stringent approval standards imposed by Europe.”

He refers to the mandatory safety features and increasingly strict emission standards that require manufacturers to invest heavily in hybrid and electric technologies.

Ban on ICEs

Europe wants to stop selling new cars with combustion engines from 2035. However, vehicles with a combustion engine are not yet written off, certainly not for private consumers. However, vehicles with combustion engines have also become more expensive.

There is also a shift toward larger and more expensive models (SUVs). Today, there is less choice in cheaper segments, which means families have to borrow more quickly and more. Manufacturers are offering noticeably fewer city cars and more larger models and SUVs – vehicles that provide a larger profit margin.

Increasingly common

Electric and hybrid vehicles are usually more costly. Electrification has contributed to a greater focus on the higher segment, increasing the average price. Borrowing has become increasingly common today: more and more Belgians have to apply for credit just to be able to buy a car.

Cars have also become significantly more expensive in France and the Netherlands, which increases the need for financing. Car financing is, therefore, well established in both countries. Interest rates in France are currently relatively low, while they are significantly higher in the Netherlands.