Auto Sales Plunge 25%: High Interest Rates and Credit Caps Tighten Market

The automotive sector hit a critical breaking point in July with a 25% sales drop; experts warn that a 20% contraction by year‑end is virtually unavoidable.

The Destructive Impact of Rising Interest Rates

Former OYDER Chairman Turgay Mersin pointed out that vehicle loan rates above 30% are eroding consumer demand at its core. Higher financing costs are pushing back purchase decisions among middle‑ and high‑income buyers.

■Rates above 30% lift average loan costs by 12%.

■Extending repayment periods pushes total interest payments to 45%.

■Combined with vehicle price inflation, total acquisition costs can reach 60%.

Credit Limits: A Critical Gap in Consumer Financing

Mersin emphasized that current vehicle‑loan caps—1.5 million TRY—make cars under this price virtually unattainable. Allowing 50‑60% of the vehicle price to be financed is an urgent prerequisite for market revival.

■A 50‑60% financing ratio eases down‑payment pressure.

■Raising limits could boost annual sales of 80,000 units by 15%.

■Lifting credit utilization to 70% would preserve sectoral employment by 4%.

VAT Revenue Decline and Macro‑Economic Ripple Effects

In 2025, the automotive sector generated 787 billion 872 million TRY in special consumption tax (ÖTV), a 46.56% increase over the prior year; however, the sales slump threatens the sustainability of this revenue stream, adding pressure on the fiscal balance.

■2025 ÖTV revenue: 787 bn TRY (+46.56%).

■July sales dip could push potential ÖTV loss up to 30%.

■New incentive packages are needed to protect the tax base.

Strategic Recommendations and Policy Implications

Analysts agree that short‑term rate cuts will have limited effect, but restructuring credit limits and enacting a scrap‑incentive law are pivotal for market recovery.

■Raise vehicle‑loan limits to 60% of the car price.

■Implement a scrap law to accelerate turnover of old vehicles.

■Postpone the minimum flat‑rate tax to shield the market from a shock.

Expert Note (Zeynep Turan): Turkey’s current credit policy fundamentally weakens consumer financing. Banks face high risk premiums, making rate cuts difficult and choking vehicle‑loan demand. The government should lift credit limits to 50‑60% and codify a scrap‑incentive law to revive not only auto sales but also ancillary industries and jobs. A short‑term rate cut alone won’t suffice; a holistic approach combining structured loan products and tax reforms is essential.