Spain is the world’s fifth largest exporter of cars, after Japan, France, Germany and South Korea, exporting over 2.25 million(1) cars in 2005. This represents 82 per cent of the output of the country’s automotive manufacturers.

This industrial powerhouse, one of the largest manufacturing sector in Spain that represents six per cent of GDP, supplies a wide range of marques to markets globally. It also supplies the domestic market of over 27 million vehicles, in which two-thirds of people own a car, resulting in a national average of 1.5 people per car. 

In 2005, 1.5 million new vehicles were sold, setting a record for new sales for the second year running, in a market worth nearly €30 billion(2). This was substantial growth of over 8% on the previous year but does represent a slight slowdown from previous years. The value of purchases is also increasing, up 6 per cent year-on-year, with average price of a car in 2005 €20,500.

Small-size diesel cars are the most popular choice of Spanish consumers, although SUV sales are growing rapidly. While these small models have a market share of nearly 40 per cent, the luxury marques, such as BMW, are experiencing a significant increase in demand, reflecting the growing spending power of consumers. The Spanish automotive finance industry is mature and highly competitive. Aggressive campaigns, price wars and long financing periods (up to 120 months) have eroded margins and profitability for all lending organisations in Spain. Automotive lending forms almost one-third of all finance arrangements and more than 50 per cent of car buyers use financial products to fund their purchase. Of these, half use finance houses, one-fifth use bank loans and the rest take up finance direct with the manufacturer’s finance company. The biggest of these are Renault, Peugeot, Ford, Seat and Fiat.

Even with the growth in sales, the forecast for the industry is not wholly positive, as it is impacted by interest rate rises, the high price of fuel and the uncertainty within the European economy and automotive industry. All of these factors increase lenders’ operational risks and are likely to increase the price of loans for consumers over time. In this environment, lenders face a declining number of loans and a rising rate of risk, potentially leading to higher collections costs and bad debt as delinquency increases.

Indeed, this trend is already starting to be seen amongst consumers; with an increase in delinquency of 6% in the last year, 2005 ended with the worst rate seen in the industry for many years. Unfortunately, rising credit risk is not the only problem facing automotive lenders, as fraud is also on the increase. Spain has traditionally seen very low levels of fraud but recent years have seen this crime increase significantly (3). The variety of frauds has also increased, with a significant rise in identity theft and the use of false documentation.Spanish automotive lenders are well advanced in the use of credit scoring and automated decisioning solutions to undertake a rigorous customer evaluation at application. However, in this highly competitive market, with the increasing threat of bad debt and fraud, lenders need to ensure that their systems are sophisticated and robust in order to tackle the challenges that lie ahead.


By Antonio Romero, OC Director, Experian Decision Analytics Iberia