Car loans have doubled in the past five years despite low consumer confidence and a tightening of household spending since the global financial crisis, new research has found.
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New car and station wagon loans totalled $6.9 billion in 2014, up from $3.4 billion in 2009, according to market researcher IBISWorld.
Australians have borrowed on average 15 per cent more each year since 2009 to buy new cars and station wagons.
In the preceding five years before 2009, new car loans declined at 2.9 per cent a year.
Record low interest rates and the ease with which consumers can unlock equity in their own home have been fuelling loans to buy new vehicles, the market research firm said.
"Rising house prices have enabled many mortgage holders to refinance and release more of the equity in their homes. This has encouraged households to spend on one-off big-ticket items, such as new cars, despite broader concerns about incomes and cashflow," IBISWorld industry analyst Andrei Ivanov said.
"It may seem incongruous for consumers to make such purchases while being budget-conscious with day-to-day expenditure, but the fact that funds are readily available when refinancing, and at attractive interest rates, is motivation enough for many."
The firm's research also shows most of the consumers who are taking up new loans are also new property owners in their thirties and forties
"What happens is when the thirties to forties get into the property market and experience gains in property prices, they feel wealthier," IBISWorld Senior Industry Analyst Caroline Finch said.
"The wealth effect is creating this flow-on effect to cars. Consumer propensity to replace household items is still very low but cars a bit different to say fridges because they are not very discretionary [really]. Many still rely on cars to get to work."
But Ms Finch expects the rate of new loan growth to slow in 2015.
"Consumer confidence is still very low, so there isn't a real worry about an over-extension of credit," she said. "Spending on new cars is just consumers opening up their wallets a bit."
Peter Arnold from financial comparison website RateCity shares her view.
"I wouldn't go to the extent of saying increased car loans are a start of any subprime problem. But the borrowing certainly needs to be kept in check," he said.
Mr Arnold said car loans over a twenty-year period showed lots of fluctuations.
"I don't think it is cause of major concern. The longer term trend is that it comes off."
Michelle Hutchison from Finder.com.au, a financial products comparison website, said the increased competition for car loans between traditional banks and car dealerships also attracted new borrowers.
But IBISWorld analysts warned that borrowers should factor in future interest rises.
"Borrowers have enjoyed interest rates [of] lower than 10 per cent since June 1996, and as a result, many Australians may find it challenging to service loans on new purchases should there be a significant rate increase," he said.
