Consumer Credit in Germany

2020 IMPACT

COVID-19 results in shrinking new business and loan defaults

The sudden economic downturn resulting from the COVID-19 pandemic led to an abrupt decline in demand for consumer credit in Germany. Driven by the economic context, consumer credit immediately suffered from a significant drop in consumer confidence and the propensity to purchase big-ticket items via loans.

Auto and education lending are both impacted, one negatively, the other positively

Consumer uncertainty and hesitation following the COVID-19 pandemic became particularly obvious in the declining demand for new cars, often purchased via loans. Therefore, in 2020, auto lending, as one of the biggest lending categories in terms of value, recorded a significant drop in gross lending compared to 2019.

Government policies aim to restore and increase consumer confidence

As part of a stimulus package to counter the economic impact of the COVID-19 pandemic, the German government introduced a temporary cut in value-added-tax (from 19% to 16%, with the reduced rate falling from 7% to 5%) to boost domestic demand and spur consumer confidence. Announced to only be in place in the second half of 2020, the measure provided an incentive to take out loans for major purchases, thereby somewhat mitigating the economic downturn and declining demand for consumer credit.

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