Russians have withdrawn approximately 500 billion rubles from banks this year to purchase vehicles.
Car Loans in Russia Stuck in a RutVICE, June 3, 2025, 16:56
The Slump Continues
Victorian Training Bank (VTB) reported a 48% decrease in auto loans issued within the first five months of 2025, compared to the same period last year. May saw a paltry 115 billion rubles in car loans, marking a 2% increase from April but falling nearly short of the May 2024 numbers.
High interest rates, the Central Bank's risk-based policy, and increased disposal fees have kept a firm grip on the car loan market. While May saw a minor uptick, largely due to dealers offering discounts to clear inventory and a shift in demand to the second half of the year amid fears of tighter credit conditions, the year-over-year figures still reveal a significant drop.
Focusing on Quality over Quantity
The majority of lending currently revolves around new vehicles, thanks to government support and manufacturer-sponsored programs. Konstantin Karakalov, VTB's Vice President and Head of Partner Sales for Auto Loans, comments, "The auto loan market is undergoing a fundamental transformation. Regulatory measures and costly money are squeezing traditional lending, steering demand towards subsidized programs—both state and manufacturer-led. Banks are now more concerned with the quality of their portfolio, particularly in the secondary market, where high interest rates necessitate a cautious approach."
Behind the Scenes
Although specific details about the current trends and factors shaping Russia's auto loan market are scarce, insights into broader global and Russian financial markets can offer a glimpse into potential drivers. These include:
- Rising Interest Rates: With the Russian bank lending rate reaching 22.23% in March 2025, borrowing is becoming more costly, which may affect consumers' willingness to apply for car loans.
- Global Economic Uncertainty: Economic instability and escalating interest rates worldwide can influence consumer spending and borrowing habits, potentially impacting the car loan sector.
- Local Market Trends: While detailed data concerning Russia's car loan market is scarce, trends observed elsewhere, such as increasing repossession rates due to high vehicle prices and interest rates, might mimic similar effects in Russia assuming comparable market conditions.
- Regulatory Factors: Changes in regulatory policies or economic sanctions could further impact Russia's auto market, including lending conditions and consumer behavior.
A comprehensive analysis would necessitate access to specialized reports or studies focused on Russia's car loan market as of June 2025.
- In the face of soaring interest rates and industry-wide cost increases, banks like Victorian Training Bank (VTB) are taking a cautious approach with their auto loan portfolios, focusing more on quality than quantity.
- The struggling car loan market in Russia is being affected by a myriad of factors, including global economic uncertainty, rising interest rates, and local market trends, all of which threaten to keep the industry in a rut for the foreseeable future.
